10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2016

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from _____ to _____

Commission File No. 1-10762

______________________________

Harvest Natural Resources, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	77-0196707
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
1177 Enclave Parkway, Suite 300
Houston, Texas	77077
(Address of Principal Executive Offices)	(Zip Code)

(281) 899-5700

(Registrant's Telephone Number, Including Area Code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒  No   ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ☒  No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☒
Non-Accelerated Filer	☐	Smaller Reporting Company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐  No   ☒

At August 4, 2016,  the Registrant had 51,393,479shares of its common stock, par value $0.01 per share, outstanding.

HARVEST NATURAL RESOURCES, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets at June 30, 2016 (Unaudited) and  December 31, 2015	2
	Unaudited Consolidated Condensed Statements of Operations and ComprehensiveLoss for the Three and Six Months Ended June 30, 2016 and 2015	3
	Unaudited Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015	4
	Notes to Consolidated Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A	Risk Factors	37
Item 6.	Exhibits	40
Signatures		42

HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except per share data)

	June 30,		December 31,
	2016		2015
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,800	$	7,761
Accounts receivable		264		2,461
Prepaid expenses and other		452		826
TOTAL CURRENT ASSETS		3,516		11,048
LONG-TERM NOTE RECEIVABLE – RELATED PARTY, net of reserve for $5.2 million at June 30, 2016		—		—
PROPERTY AND EQUIPMENT:
Oil and natural gas properties (successful efforts method)		30,924		31,006
Other administrative property, net		642		455
TOTAL PROPERTY AND EQUIPMENT, net		31,566		31,461
EMBEDDED DERIVATIVE ASSETS		7,144		5,010
LONG-TERM DEFERRED INCOME TAX ASSETS		85		120
OTHER ASSETS, net of allowance for $0.7 million (2016 and  2015)		123		142
TOTAL ASSETS	$	42,434	$	47,781
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable, trade and other	$	240	$	370
Accrued expenses		7,362		3,327
Accrued interest - related party		1,084		954
Other current liabilities		107		165
TOTAL CURRENT LIABILITIES		8,793		4,816
LONG-TERM DEBT DUE TO RELATED PARTY, net of discount		7,824		214
WARRANT DERIVATIVE LIABILITY WITH RELATED PARTY		16,417		5,503
OTHER LONG-TERM LIABILITIES		—		42
TOTAL LIABILITIES		33,034		10,575
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.01 per share; authorized 5,000 shares; issued and outstanding, none		—		—
Common stock, par value $0.01 per share; shares authorized 150,000 (2016 and 2015); shares  issued  57,987 (2016 and  2015); shares outstanding  51,415 (2016 and 2015)		580		580
Additional paid-in capital		303,603		302,273
Accumulated deficit		(226,772)		(199,778)
Treasury stock, at cost, 6,572 shares (2016 and  2015)		(66,316)		(66,316)
TOTAL HARVEST STOCKHOLDERS’ EQUITY		11,095		36,759
NONCONTROLLING INTEREST OWNERS		(1,695)		447
TOTAL EQUITY		9,400		37,206
TOTAL LIABILITIES AND EQUITY	$	42,434	$	47,781

See accompanying notes to consolidated  condensed financial statements.

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HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
EXPENSES:
Depreciation and amortization	$	14	$	27	$	40	$	56
Exploration expense		418		575		1,139		2,507
Impairment expense - oilfield inventories		—		—		128		—
Reserve for note receivable - related party		—		—		5,160		—
General and administrative		4,573		5,517		10,522		9,675
		5,005		6,119		16,989		12,238
LOSS FROM OPERATIONS		(5,005)		(6,119)		(16,989)		(12,238)
OTHER NON-OPERATING INCOME (EXPENSE):
Change in fair value of warrant derivative liability		(6,853)		2,418		(10,914)		2,418
Change in fair value of embedded derivative assets and liabilities		1,696		557		1,687		557
Interest expense		(1,373)		(614)		(2,469)		(851)
Loss on issuance of debt and warrant		—		(20,402)		—		(20,402)
Foreign currency transaction gains, net		38		77		192		80
Transaction costs related to sale of Harvest Holding		(1,551)		—		(1,551)		—
		(8,043)		(17,964)		(13,055)		(18,198)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(13,048)		(24,083)		(30,044)		(30,436)
INCOME TAX EXPENSE		8		1,604		16		1,220
LOSS FROM CONTINUING OPERATIONS		(13,056)		(25,687)		(30,060)		(31,656)
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST OWNERS		(158)		(262)		(3,066)		(614)
NET LOSS AND COMPREHENSIVE LOSS ATTRIBUTABLE TO HARVEST	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)
LOSS PER SHARE:
Basic loss per share	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)
Diluted loss per share	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)

See accompanying notes to consolidated condensedfinancial statements.

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HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2016		2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(30,060)	$	(31,656)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		40		56
Impairment expense - oilfield inventories		128		—
Amortization of debt financing costs		—		283
Accretion of discount on debt		427		145
Reserve for note receivable - related party		5,160		—
Loss on debt issuance		—		20,402
Share-based compensation-related charges		1,914		1,491
Deferred income tax expense		—		1,200
Change in fair value of warrant derivative liability		10,914		(2,418)
Change in fair value of  embedded derivative assets and liabilities		(1,687)		(557)
Changes in operating assets and liabilities:
Accounts receivable		2,197		(152)
Prepaid expenses and other		374		(15)
Long-term deferred tax assets		35		(65)
Other assets		19		583
Accounts payable		(130)		508
Accrued expenses		3,419		(977)
Accrued interest		1,867		100
Other current liabilities		(58)		42
Other long-term liabilities		(1)		160
NET CASH USED IN OPERATING ACTIVITIES		(5,442)		(10,870)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net		(283)		(353)
Note receivable - related party		(5,160)		—
NET CASH USED IN INVESTING ACTIVITIES		(5,443)		(353)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt repayment		—		(8,900)
Gross proceeds from issuance of debt and warrant		5,000		33,500
Contributions from noncontrolling interest owners		924		163
Financing costs		—		(1,245)
NET CASH PROVIDED BY FINANCING ACTIVITIES		5,924		23,518
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(4,961)		12,295
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		7,761		6,585
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,800	$	18,880

See accompanying notes to consolidated condensed financial statements.

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Supplemental Schedule of Noncash Investing and Financing Activities:

	Six Months Ended June 30,
	2016		2015
Supplemental Cash Flow Information:	(in thousands)
Cash paid during the period for interest expense	$	—	$	470
Cash paid during the period  for income taxes		8		4
Supplemental Schedule of Noncash Investing and Financing Activities:
Decrease in current liabilities related to additions of property and equipment	$	(10)	$	(99)
Increase in Stockholders' Equity from forgiveness of note payable and accrued interest		—		6,157
Increase in long-term debt due to the capitalization of accrued interest		1,736		—

See accompanying notes to consolidated condensed  financial statements.

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HARVEST NATURAL RESOURCES, INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements

Note 1 – Organization

Organization

Harvest Natural Resources, Inc. (“Harvest” or the “Company”) is a petroleum exploration and production company incorporated under Delaware law in 1988.

We acquired and developed significant interests in the Bolivarian Republic of Venezuela (“Venezuela”). Our Venezuelan interests are owned through Harvest-Vinccler Dutch Holding B.V., a Dutch private company with limited liability (“Harvest Holding”). Our 51 percent ownership of Harvest Holding is through HNR Energia B.V. (“HNR Energia”) in which we have a direct controlling interest. We have partners, Oil & Gas Technology Consultants (Netherlands) Coöperatie U.A., (“Vinccler”, a controlled affiliate of Venezolana de Inversiones y Construcciones Clerico, C.A.), which has a 20 percent noncontrolling interest in Harvest Holding, and  Petroandina Resources Corporation N.V. (“Petroandina”, a wholly owned subsidiary of Pluspetrol Resources Corporation B.V. (“Pluspetrol”)), which has a 29 percent noncontrolling interest in Harvest Holdings.  We do not have business relationships with Vinccler or Pluspetrol outside of Venezuela.

Harvest Holding owns 100 percent of HNR Finance B.V. (“HNR Finance”), and HNR Finance owns a 40 percent interest in Petrodelta, S.A. (“Petrodelta”). Petrodelta is our cost method investment in eastern Venezuela responsible for the exploration, development, production, gathering, transportation and storage of hydrocarbons in six oil fields.  Petrodelta is governed by its own charter and bylaws and the shareholders intend that Petrodelta be self-funding and rely on internally-generated cash flows. 

Corporación Venezolana del Petroleo S.A. (“CVP”) and PDVSA Social S.A. own the remaining 56 percent and 4 percent, respectively, of Petrodelta. Petroleos de Venezuela S.A. (“PDVSA”) owns 100 percent of CVP and PDVSA Social S.A. Through our indirect 51 percent in Harvest Holding, we indirectly own a net 20.4 percent interest in Petrodelta.

In addition to our interests in Venezuela, we hold exploration acreage offshore of the Republic of Gabon (“Gabon”) through the Dussafu Marin Permit (“Dussafu PSC”).  See Note 7 – Gabon.

Interim Reporting

In our opinion, the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position as of June 30, 2016, results of operations for the three and six months ended June 30, 2016 and 2015, and the cash flows for the six months ended June 30, 2016 and 2015.  TheDecember 31, 2015 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by United States of America generally acceptedaccounting principles (“U.S. GAAP”).  The unaudited consolidated condensed financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by U.S. GAAP. The consolidated condensed financial statements included in this report should be read with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, which include certain definitions and a summary of significant accounting policies. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

Securities Purchase Agreement

On June 19, 2015, the Company and certain of its domestic subsidiaries entered into a securities purchase agreement (the “Securities Purchase Agreement”) with CT Energy Holding SRL (“CT Energy”), a private investment firm organized as a Barbados Society with Restricted Liability, under which CT Energy purchased certain securities of the Company and acquired certain governance rights.  Harvest immediately received gross proceeds of $32.2 million from the sale of the securities, as described below.   Key terms of the transaction include:

· CT Energy acquired a $25.2 million, five year, 15.0% non-convertible senior secured promissory note (the “15% Note”). Interest is payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2015. 

· CT Energy acquired a $7.0 million, five year, 9.0% convertible senior secured note (the “9% Note”). The 9% Note and associated accrued interest of $0.1 million was converted into 8,667,597 shares of Harvest common stock at a conversion price of $0.82 per share on September 15, 2015.  Immediately after the conversion, CT Energy owned approximately 16.8% of Harvest’s common stock.

· CT Energy also acquired a warrant to purchase up to 34,070,820 shares of Harvest's common stock at an initial exercise price of $1.25 per share (the “CT Warrant”). The CT Warrant would become exercisable only after the 30-day volume weighted average price of Harvest's common stock equals or exceeds $2.50 per share (“Stock Appreciation Date”).  The CT 6  

Warrant is cash-exercisable, but CT Energy may surrender the 15% Note to pay for a portion of the aggregate exercise price. 

· CT Energy acquired a five-year 15.0% non-convertible senior secured note (the “Additional Draw Note”), under which CT Energy may elect to provide $2.0 million of additional funds to the Company per month for up to six months following the one-year anniversary of the closing date of the transaction (up to $12.0 million in aggregate).  For funds loanedunder the Additional Draw Note, interest will be compounded quarterly at a rate of 15.0% per annum and will be payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2016.  See Share Purchase Agreement – Additional Funding for further information.

· CT Energy was granted certain governance rights in the transaction, including the right to appoint specified directors. 

· CT Energia Holding Ltd. (“CT Energia”), a Malta corporation and the Company, entered into a Management Agreement (the “Management Agreement”), under which CT Energia and its representatives will provide management services with respect to the operations of the Company’s business as it relates to Petrodelta and Venezuela generally.

Share Purchase Agreement

On June 29, 2016, the Company, and its wholly owned subsidiary, HNR Energia, entered into a share purchase agreement (the “Share Purchase Agreement”) with CT Energy, pursuant to which HNR Energia agreed to sell to CT Energy HNR Energia’s 51 percent interest in Harvest Holding.

At the closing of the Transaction (the “Closing”), CT Energy or an affiliate will pay consideration consisting of:

· $80.0 million in cash, subject to adjustment as described below under “Adjustments to Cash Consideration”;

· an 11% non-convertible senior promissory note payable to HNR Energia six months from the Closing in the principal amount of $12.0 million, which will be guaranteed by the controlling equityholder of CT Energy;

· the return of 8,667,597 shares  to Treasury of the Company’s common stock owned by CT Energy (approximately 16.8% of all outstanding shares);

· the cancellation of $30.0 million in principal under the 15% Note; and

· the cancellation of the CT Warrant.

Conditions to Closing

Consummation of the sale of our Venezuelan interests is subject to the following conditions, in addition to customary closing conditions:

· the approval of the sale of our Venezuelan interests by the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock, as well as by the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock that are not owned, directly or indirectly, by CT Energy or its affiliates (the “Requisite Stockholder Approval”);

· the approval by the Ministerio del Poder Popular de Petróleo y Minería of the Bolivarian Republic of Venezuela of the change in control, resulting from the sale of Venezuelan interests (the “Venezuela Approval”); and

· the waiver by Petroandina of its rights under the Shareholders’ Agreement with HNR Energia, dated as of December 16, 2013 (the “Shareholders’ Agreement”), with respect to the sale of our Venezuelan interests, including any obligation of CT Energy to become a party to the Shareholders’ Agreement, or the exercise by Petroandina of its change of control put right to sell its 29% interest in Harvest Holding to CT Energy at the same time as HNR Energia sells its interests.

Adjustments to Cash Consideration

At the Closing, the $80.0 million in cash consideration will be (i) reduced by the amount by which the outstanding principal and accrued interest under the 15% Note exceeds $30.0 million (and the entire 15% Note will be cancelled); (ii) reduced by the amount of outstanding principal and accrued interest under the Additional Draw Note (as described below under “Additional Funding”) (and the Additional Draw Note will be cancelled); and (iii) increased by the aggregate amount of cash amounts contributed by the Company or HNR Energia to, or accounts payable and other expenses accrued by the Company or HNR Energia for the benefit of, Harvest Holding and its subsidiaries in respect of expenditures included in Harvest Holdings’ budget.

Letter of Credit

Upon the execution of the Share Purchase Agreement, CT Energy provided to HNR Energia a $15 million irrevocable standby letter of credit issued by JP Morgan Chase Bank (the “Letter of Credit”).  If the Closing occurs, the Letter of Credit will be returned undrawn to CT Energy and JP Morgan Chase Bank. HNR Energia is entitled to draw on the Letter of Credit and keep the $15 million proceeds as liquidated damages if (1) the Share Purchase Agreement is terminated because of a material uncured breach by CT Energy or (2) the Share Purchase Agreement is terminated when all conditions to closing have been satisfied (other than the Venezuela Approval and other conditions that can only be satisfied by CT Energy at the Closing), including the Requisite Stockholder Approval.

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If the Share Purchase Agreement is terminated for any other reason, the Letter of Credit must be returned undrawn to CT Energy and JP Morgan Chase Bank.

No Shop and Termination Matters

Subject to certain limited exceptions, the Share Purchase Agreement provides that the Company, its subsidiaries, and its and their respective representatives are prohibited from, among other things, initiating, soliciting or knowingly encouraging or facilitating the making of any alternative acquisition proposals from third parties or providing non-public information to or participating in any discussions or negotiations regarding an alternative acquisition proposal with any person that has made an alternative acquisition proposal, subject to customary exceptions prior to the receipt of the Requisite Stockholder Approval relating to proposals that are reasonably likely to lead to a “Superior Proposal” (as defined in the Share Purchase Agreement).

The Share Purchase Agreement contains certain termination rights, including the right of HNR Energia to terminate the Share Purchase Agreement in order for the Company to accept a Superior Proposal (so long as the Company complies with certain notice and other requirements under the Share Purchase Agreement), and provides that, upon termination of the Share Purchase Agreement by HNR Energia or CT Energy in certain circumstances, HNR Energia will be required to pay CT Energy a termination fee of $4.6 million. Such specified circumstances include, among others, (i) termination by HNR Energia in order for the Company to enter into an alternative acquisition agreement with respect to a Superior Proposal, in which case HNR Energia will also be required to pay the outstanding principal amount of the 15% Note and Additional Draw Note plus accrued and unpaid interest and any make-whole premium, (ii) termination by CT Energy after a change of recommendation by the Company’s board of directors and (iii) termination by CT Energy after a breach by the Company or HNR Energia of the Share Purchase Agreement that gives rise to the failure of the closing conditions and is either not capable of being cured by the outside date specified in the Share Purchase Agreement or is not cured within 30 days of notice of such breach. CT Energy may also terminate the Share Purchase Agreement if the Requisite Stockholder Approval is not obtained by September 15, 2016. Additionally, either CT Energy or HNR Energia may terminate the Share Purchase Agreement if all conditions precedent to the Closing are not satisfied within 30 days after receipt of the Requisite Stockholder Approval; provided, however, that a party that is in material breach of its obligations under the Share Purchase Agreement may not terminate the Share Purchase Agreement if the material breach is the principal cause of a condition to Closing not being satisfied.

Additional Funding

To fund Harvest’s transaction expenses and operations until the Closing, CT Energy has agreed to lend Harvest $2.0 million per month for up to five months at 15% interest beginning on July 19, 2016, until the earlier of the Closing or the termination of the Share Purchase Agreement. These loans will be made under the Additional Draw Note, which is discussed above under “Securities Purchase Agreement.” As of August 8, 2016, the outstanding principal under the Additional Draw Note is $4.0 million, consisting of $2.0million loans by CT Energy on each on June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016.  As discussed above, the $80 million cash consideration will be reduced by the amount outstanding under the Additional Draw Note at Closing, including both outstanding principal and accrued interest.

While CT Energy is making the monthly $2.0 million loans under the Additional Draw Note, as CT Energy currently has committed to do under the Share Purchase Agreement, the original claim date of June 19, 2016, (the “Claim Date”) under the Securities Purchase Agreement will be extended on a month-by-month basis.  Upon the expiration of the Claim Date, CT Energy’s governance rights under the Securities Purchase Agreement would terminate (but only if the Stock Appreciation Date had failed to occur before the Claim Date).

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Other Material Terms

The Share Purchase Agreement contains customary representations, warranties and covenants. These representations, warranties and covenants were made only for purposes of the Share Purchase Agreement and as of specific dates, are solely for the benefit of the parties to the Share Purchase Agreement, may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Share Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors. Investors should not rely on the representations, warranties or covenants or any description thereof as characterizations of the actual state of facts or condition of the Company, CT Energy, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Share Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company, CT Energy or their subsidiaries or affiliates.

Other material terms of the Share Purchase Agreement are as follows.

· The Company agreed to guarantee HNR Energia’s performance of all obligations arising under the Share Purchase Agreement.

· From the date of the Share Purchase Agreement and continuing in effect after the Closing, the Company, on behalf of itself and its subsidiaries, waived all rights to exercise any legal action against Petrodelta, any affiliate of Petrodelta or any governmental authority.

· At the Closing, the Securities Purchase Agreement and certain agreements related to the Securities Purchase Agreement, including the Management Agreement will terminate. Additionally, all liens securing Company debt formerly owed to CT Energy will be released at the Closing. After the Closing, the Company’s primary assets will be cash from the proceeds of the transaction and the Company’s oil and gas interests in the Republic of Gabon.

Long-Term Receivable – CT Energia

On January 4, 2016, HNR Finance provided a loan to CT Energia in the amount of $5.2 million under an 11.0% promissory note due 2019 (the “CT Energia Note”). The purpose of the loan is to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta that is 40% owned by HNR Finance and through which Harvest’s Venezuelan oil and natural gas interests are held. The loans to Petrodelta are to assist Petrodelta in satisfying its working capital needs and discharging its obligations. Interest on the CT Energia Note is due and payable on the first of each January and July, commencing July 1, 2016. The full amount outstanding, including any unpaid accrued interest, is due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan is the payments of principal and interest from loans that CT Energia has made to Petrodelta. If and when CT Energia receives payments of principal or interest from loans it has made to Petrodelta, then those proceeds must be used to pay unpaid interest and principal under the CT Energia Note. All payments made by CT Energia to HNR Finance under the CT Energia Note must be made in U.S. Dollars.   No interest payments have been made under the CT Energy note as of August 8, 2016.

The source of funds for HNR Finance’s $5.2 million loan to CT Energia was a capital contribution from Harvest Holding, which, in return, received the same aggregate amount of capital contributions from its shareholders, pro rata according to their equity interests in Harvest Holding. Of that aggregate amount of capital contributions, HNR Energia contributed $2.6 million, which was a capital contribution from Harvest.    The Management Agreement the Company entered into with CT Energia also makes CT Energia a related party.  During the three months ended March 31, 2016, we recorded a $5.2 million allowance to fully reserve the CT Energia Note due to concerns related to the continued deteriorating economic conditions in Venezuela and our assessment relating to the probability that the CT Energia Note will be collected.  As of June 30, 2016 the CT Energia Note remains fully reserved and we are not accruing interest on this note receivable.

Note 2 – Liquidity

We expect that for 2016 we will not generate revenue, will continue to generate losses from operations, and our cash flows will not be sufficient to cover our operating expenses. Therefore, expected continued losses from operations, capital needs and uses of cash will be funded through debt or equity financings, farm-downs, anticipated CT Energy Transaction, delay of the discretionary portion of our capital spending to future periods or operating cost reductions.  Our ability to continue as a going concern depends on our ability to complete the transaction under the Share Purchase Agreement and the success of our planned exploration and development activities in Gabon.  There can be no guarantee of future capital acquisition, fundraising or exploration success or that we will realize the value of our exploration and exploitation acreage and suspended wells.  Our current cash position and our inability to access additional capital may limit our available opportunities or not provide sufficient cash for operations.

Our primary ongoing sources of cash are issuances of debt and the sale or farm-down of oil and natural gas properties in Gabon. Our primary use of cash has been to fund oil and natural gas exploration projects, principal payments on debt, interest payments, and

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general and administrative costs. We require capital principally to fund the exploration and development of new oil and natural gas properties. We have various contractual commitments pertaining to exploration, development and production activities.  See Note 10 – Commitments and Contingencies for our contractual commitments.

In January, April and July 2016, due to our liquidity position, the Company amended the 15% Note to increase the principal amount of the note equal to the amount of the accrued interest, less withholding tax that was due to CT Energy.  On May 3, 2016, the Company increased the principal amount of the 15% Note by $3.0 million bringing the principal amount outstanding under the 15% Note to$30.0 million as of June 30, 2016.  As of June 30, 2016 we capitalized interest payments totaling $1.7 million.  There can be no assurance that we will be able to amend our loan agreement with CT Energy to increase the principal amount of the 15% Note if our liquidity position does not allow us to make future interest payments when due.

As discussed above in Note 1 – Share Purchase Agreement – Additional Funding, the outstanding principal under the Additional Draw Note is $4.0 million, consisting of loans of $2.0million by CT Energy on each of June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016 to fund Harvest’s transaction expenses and operations until the Closing. 

We are currently assessing alternatives for our Gabon asset and we intend to continue our consideration of a possible sale or farm-down of our Gabon asset if we are able to negotiate a sale or sales in transactions that our Board of Directors believes are in the best interests of the Company and its stockholders.   Given that we do not currently have any operating cash inflows, we may also decide to access additional capital through equity or debt sales; however, there can be no assurance that such financing will be available to the Company or on terms that are acceptable to the Company.

On December 2, 2015, the Company received notification from the New York Stock Exchange (“NYSE”) that the Company was not in compliance with the NYSE's continued listing standards, which require a minimum average closing price of $1.00 per share over 30 consecutive trading days.  Under the NYSE's rules, Harvest has a period of six months from the date of the NYSE notice to bring its share price and 30 trading-day average share price back above $1.00.  During this period, the Company’s common stock will continue to be traded on the NYSE under the symbol “HNR”, subject to the Company’s compliance with other NYSE continued listing requirements, but will be assigned the notation .BC after the listing symbol to signify that the Company is not currently in compliance with the NYSE’s continued listing standards.  As required by the NYSE, in order to maintain its listing, Harvest notified the NYSE that it intends to cure the price deficiency.

On April 25, 2016, the Company received a notice from the NYSE stating that the Company is not in compliance with a second NYSE continued listing requirement, which provides that a company is not in compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders’ equity is less than $50 million.  As required by NYSE rules, the Company notified the NYSE that, within 45 days of receipt of the notice, the Company will submit a business plan that demonstrates its ability to regain compliance within 18 months. The NYSE accepted our plan on July 14, 2016, and we are now subject to quarterly monitoring for compliance with the plan. If the Company fails to comply with the business plan the NYSE may commence suspension and delisting procedures.

Failure to generate sufficient cash flow, raise additional capital through debt or equity financings, complete the proposedtransaction under the Share Purchase Agreement, farm-downs, or reduce operating costs could have a material adverse effect on our ability to meet our short- and long-term liquidity needs and achieve our intended long-term business objectives.

The above circumstances raise substantial doubt about our ability to continue as a going concern.  While we believe the issuance of additional equity securities, short- or long-term debt financing, completion of the proposed transaction under the Share Purchase Agreement, farm-downs, the delay of the discretionary portion of our capital spending to future periods or operating cost reductions could be put into place which would not jeopardize our operations and future growth plans, there can be no assurance that such events will be successful.

Our financial statements have been prepared under the assumption that we will continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business.  The accompanying consolidated condensed financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that could result should we be unable to continue as a going concern.

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated condensed financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. All intercompany profits, transactions and balances have been eliminated. Third-party interests in our majority-owned subsidiaries are presented as noncontrolling interests owners.

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Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.  These reclassifications did not affect our consolidated condensed financial results.

Note Receivable

A loan is considered impaired if it is probable, based on current information and events, that the Company will be unable to collect all amounts due according to the contractual terms of the loan. Loans are reviewed for impairment and include loans that are past due, non-performing or in bankruptcy. Recognition of interest income is suspended and the loan is placed on non-accrual status when management determines that collection of future interest income is not probable. Accrual is resumed, and previously suspended interest income is recognized, when the loan becomes contractually current and/or collection doubts are removed. Cash receipts on impaired loans are recorded first against the receivable and then to any unrecognized interest income.

Investment in Affiliate

We are accounting for our investment in Petrodelta under Accounting Standards Codification (“ASC”) 325 – Investments – Other (the “cost method”).  Under the cost method we will not recognize any equity in earnings from our investment in Petrodelta in our results of operations, but will recognize any cash dividends in the period they are received.  

As of December 31, 2015, we fully impaired the carrying value of our investment in Petrodelta.  See Note 5 – Investment in Affiliate for further information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Other important significant estimates are those included in the valuation of our assets and liabilities that are recorded at fair value on a recurring and non-recurring basis.  Actual results could differ from those estimates.

Oil and Natural Gas Properties

The major components of property and equipment are as follows: 

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)
Unproved property costs - Dussafu PSC	$	28,045	$	28,000
Oilfield inventories		2,878		3,006
Other administrative property		3,176		2,937
Total property and equipment		34,099		33,943
Accumulated depreciation		(2,533)		(2,482)
Total property and equipment, net	$	31,566	$	31,461

Other Administrative Property

Furniture, fixtures and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which range from three to five years. Leasehold improvements are recorded at cost and amortized using the straight-line method over the life of the applicable lease. For the three and six months ended June 30, 2016, depreciation expense was $14 thousand and $40 thousand, respectively.  For the three and six months ended June 30, 2015, depreciation expense was $27 thousand and $56thousand, respectively.

Other Assets

Other assets at June 30, 2016 and December 31, 2015 include deposits and retainers.  During 2015 we fully reserved the $1.1 million blocked payment related to our drilling operations in Gabon.  The payment was blocked in accordance with the U.S. sanctions against Libya as set forth in Executive Order 13566 of February 25, 2011, and administered by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”).  See Note 10 – Commitments and Contingencies.   At December 31, 2015, we recorded an allowance for doubtful accounts of $0.7 million and the remaining balance of the blocked payment was reclassified to a receivable from our joint venture partners for $0.4 million. 

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Capitalized Interest

We capitalize interest costs for qualifying oil and natural gas properties. The capitalization period begins when expenditures are incurred on qualified properties, activities begin which are necessary to prepare the property for production and interest costs have been incurred. The capitalization period continues as long as these events occur.  The average additions for the period are used in the interest capitalization calculation. During the three and six months ended June 30, 2016 and 2015, we did not capitalize interest costs due to insufficient on-going activity related to our oil and natural gas activities.

Fair Value Measurements

We measure and disclose our fair values in accordance with the provisions of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:

· Level 1 – Inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities.

· Level 2 – Inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly.

· Level 3 – Inputs to the valuation techniques that are unobservable for the assets or liabilities.

Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, accounts receivable, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), debt, embedded derivatives and warrant derivative liability. We maintain cash and cash equivalents in bank deposit accounts with commercial banks, which at times may exceed the federally insured limits. We have not experienced any losses from such investments. Concentrations of credit risk with respect to accounts receivable are limited due to the nature of our receivables. In the normal course of business, collateral is not required for financial instruments with credit risk.  The estimated fair value of cash and cash equivalents and accounts receivable, prepaid costs, accounts payable, accrued expenses and other current liabilities approximate their carrying value due to their short-term nature (Level 1).  The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value as of June 30, 2016 and December 31, 2015.  During the year ended December 31, 2015, we impaired the carrying value of our Dussafu project in Gabon by $23.2 million and our investment in affiliate by $164.7 million.  See Note 5 – Investment in Affiliate and Note 7 – Gabon for more information.

	As of June 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Recurring
Assets:
Embedded derivative asset - 15% Note	$	—	$	—	$	6,697	$	6,697
Embedded derivative asset - Additional Draw Note		—		—		447		447
	$	—	$	—	$	7,144	$	7,144
Liabilities:
SARs liability	$	—	$	93	$	241	$	334
RSUs liability		—		520		—		520
Warrant derivative liability		—		—		16,417		16,417
	$	—	$	613	$	16,658	$	17,271

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	As of December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Non recurring
Assets:
Dussafu PSC	$	—	$	—	$	28,000	$	28,000
	$	—	$	—	$	28,000	$	28,000
Recurring
Assets:
Embedded derivative asset	$	—	$	—	$	5,010	$	5,010
	$	—	$	—	$	5,010	$	5,010
Liabilities:
SARs liability	$	—	$	46	$	50	$	96
RSUs liability		—		174		—		174
Warrant derivative liability		—		—		5,503		5,503
	$	—	$	220	$	5,553	$	5,773

As of June 30, 2016, the fair value of our liability awards included $0.3 million for our SARs and $0.5 million for the RSUs both of which were recorded in accrued expenses.   As of December 31, 2015, the fair value of our liability awards included $0.1 million for our SARs which were recorded in accrued expenses and $0.2 million for our RSUs which were recorded in accrued expenses and other long-term liabilities.

Derivative Financial Instruments

As required by ASC 820, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.  See Note 9 – Warrant Derivative Liability for a description and discussion of our warrant derivative liability as well as a description of the valuation models and inputs used to calculate the fair value.  See Note 8 – Debt and Financing for a description and discussion of our embedded derivatives related to our 15% Note as well as a description of the valuation models and inputs used to calculate the fair value.  All of our embedded derivatives and warrants are classified as Level 3 within the fair value hierarchy. 

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following table provides a reconciliation of financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial assets -  embedded derivative asset:
Beginning balance	$	5,001	$	—	$	5,010	$	—
Additions		447		2,504		447		2,504
Change in fair value		1,696		123		1,687		123
Ending balance	$	7,144	$	2,627	$	7,144	$	2,627

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	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  embedded derivative liability:
Beginning balance	$	—	$	—	$	—	$	—
Additions - fair value at issuance		—		13,449		—		13,449
Change in fair value		—		(434)		—		(434)
Ending balance	$	—	$	13,015	$	—	$	13,015

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  warrant derivative liability:
Beginning balance	$	9,564	$	—	$	5,503	$	—
Additions		—		40,013		—		40,013
Change in fair value		6,853		(2,418)		10,914		(2,418)
Ending balance	$	16,417	$	37,595	$	16,417	$	37,595

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  stock appreciation rights
Beginning balance	$	120	$	—	$	50	$	—
Change in fair value		121		—		191		—
Ending balance	$	241	$	—	$	241	$	—

During three and six months ended June 30, 2016 and 2015, no transfers were made between Level 1, Level 2 and Level 3 liabilities or investments.

Share-Based Compensation

We use the fair value based method of accounting for share-based compensation. We utilized the Black-Scholes option pricing model to measure the fair value of stock options and SARs on their grant dates in years prior to 2015. Restricted stock and RSUs were measured at their fair values.  During 2015, we issued options, SARs and RSUs with an additional market condition.  To fair value these awards, we utilized a Monte Carlo simulation.

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The following table is a summary of compensation expense recorded in general and administrative expense in our consolidated condensed statements of operations and comprehensive loss by type of awards:

	Six Months Ended June 30,
Employee Stock-Based Compensation	2016		2015
	(in thousands)
Equity based awards:
Stock options	$	1,113	$	920
Restricted stock		68		68
RSUs		149		—
Total expense related to equity based awards		1,330		988
Liability based awards:
SARs		238		277
RSUs		346		226
Total expense related to liability based awards		584		503
Total compensation expense	$	1,914	$	1,491

The assumptions summarized in the following table were used to calculate the fair value of the SARs classified as Level 3 instruments that were outstanding as of the balance sheet date:

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Exercise price	Level 1 input	$	1.13
Threshold price	Level 1 input	$	2.50
Suboptimal exercise factor	Level 3 input		2.5
Term (years)	Level 1 input		4.06
Volatility	Level 2 input		110.0	%
Risk-free rate	Level 1 input		0.87	%
Dividend yield	Level 2 input		0.0	%

Income Taxes

Deferred income taxes reflect the net tax effects, calculated at currently enacted rates, of (a) future deductible/taxable amounts attributable to events that have been recognized on a cumulative basis in the financial statements or income tax returns, and (b) operating loss and tax credit carryforwards. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized.

We classify interest related to income tax liabilities and penalties as applicable, as interest expense.  We recorded no penalties during the three and six months ended June 30, 2016 and 2015.

Since December 2013, we have provided deferred income taxes on undistributed earnings of our foreign subsidiaries where we are not able to assert that such earnings were permanently reinvested, or otherwise could be repatriated in a tax free manner, as part of our ongoing business.  As of December 31, 2015 and through the second quarter of 2016, the deferred tax liability provided on such earnings was zero due to the impairment of the underlying book investment in Petrodelta.

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The 15% Note was issued, for income tax purposes, with original issue discount (“OID”).  OID generally is deductible for income tax purposes.  However, if the debt instrument constitutes an “applicable high-yield discount obligation” (“AHYDO”) within the meaning of IRC Section 163(i)(1), then a portion of the OID likely would be non-deductible pursuant to IRC Section 163(e)(5).  Our analysis of the 15% Note is that the note may be an AHYDO; consequently, a portion or all of the OID likely may be non-deductible for income tax purposes.

The Internal Revenue Service (“IRS”) audited the Company’s 2013 and 2014 tax years. The audit commenced in April 2016 and the IRS informed us that it will issue a no charge report.

Noncontrolling Interest Owners

Changes in noncontrolling interest owners were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	(1,920)	$	78,902	$	447	$	79,152
Contributions by noncontrolling interest owners		383		61		924		163
Net loss attributable to noncontrolling interest owners		(158)		(262)		(3,066)		(614)
Balance at end of period	$	(1,695)	$	78,701	$	(1,695)	$	78,701

New Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases”.  It is expected to be effective for periods beginning after December 15, 2018 for public entities.  Early application is permitted.  Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less.  All other leases will fall into one of two categories: (1) Financing leases, similar to capital leases, will require the recognition of an asset and liability, measured at the present value of the lease payments.  Interest on the liability will be recognized separately from amortization of the asset.  Principal repayments will be classified as financing outflows and payments of interest as operating outflows on the statement of cash flows.  (2) Operating leases will also require the recognition of an asset and liability measured at the present value of the lease payments.  A single lease cost, consisting of interest on the obligation and amortization of the asset, calculated such that the amortization of the asset will increase as the interest amount decreases resulting in a straight-line recognition of lease expense.  All cash outflows will be classified as operating on the statement of cash flows.  We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging (Topic 815: Contingent Put and Call Options in Debt Instruments)”.  This amendment addresses how an entity should assess whether contingent call (put) options that can accelerate the payment of debt instruments that are clearly and closely related to the debt hosts.  This assessment is necessary to determine if the option(s) must be separately accounted for as a derivative.  The ASU clarifies that an entity is required to assess the embedded call (put) options solely in accordance with the specific four-step decision sequence. This means entities  are not also required to assess whether the contingency for exercising the option(s) is indexed to interest rates or credit risk. For example, when evaluating debt instruments puttable upon a change in control, the event triggering the change in control is not relevant to the assessment.  Only the resulting settlement of debt is subject to the four-step decision sequence.  The amendment is effective for public entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.  Early adoption is permitted.  However, if an entity early adopts the amendment in an interim period, any adjustments should be reflected as of the beginning of that fiscal year.  We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.   

In March 2016, the FASB issued ASU No. 2016-07, “Investments — Equity Method and Joint Ventures (Topic 323)”. This amendment simplifies the accounting for equity method of investments, the amendment in the update eliminates the requirement in Topic 323 that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendment requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendment in this update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendment should be applied prospectively upon the effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted.  We are currently evaluating the impact of this guidance.

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In March 2016, the FASB issued ASU No 2016-09, “Compensation — Stock Compensation (Topic 718)”.  It introduces targeted amendments intended to simplify the accounting for stock compensation.  Specifically the ASU requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement.  The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur.  An entity also should recognize excess tax benefits, and assesses the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period.  That is, off balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption.  Entities will no longer need to maintain and track an Additional Paid In Capital pool.  The ASU also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows.  The amendment is effective for public entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  Early adoption is permitted.  We are currently evaluating the impact of this guidance. 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The new guidance is related to the calculation of credit losses on financial instruments. All financial instruments not accounted for at fair value will be impacted, including our trade and partner receivables. Allowances are to be measured using a current expected credit loss model as of the reporting date which is based on historical experience, current conditions and reasonable and supportable forecasts. This is significantly different from the current model which increases the allowance when losses are probable. This change is effective for all public companies for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years and will be applied with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the provisions of this guidance and are assessing its potential impact on our financial position, results of operations, cash flows and related disclosures.

Note 4 – Earnings Per Share

Basic earnings per common share (“EPS”) are computed by dividing loss from continuing operations available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. 

		Three Months Ended June 30,			Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)				(in thousands)
Loss from continuing operations(a)	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)
Net loss attributable to Harvest	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)
Weighted average common shares outstanding		51,415		42,663		51,415		42,663
Weighted average common shares, diluted		51,415		42,663		51,415		42,663
Loss per share:
Basic loss per share(a)	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)
Diluted loss per share(a)	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)

a) Net of net loss attributable to noncontrolling interests.

During the three months ended June 30, 2016 per share calculations above excluded6.7 million options and 34.1 million warrants because we had a loss from continuing operations. During the three months ended June 30, 2015 per share calculations above excluded3.7 million options and 36.9 million warrants because we had a loss from continuing operations.

During the six months ended June 30, 2016 per share calculations above excluded6.9 million options and 34.1 million warrants because we had a loss from continuing operations. During six months ended June 30, 2015 per share calculations above excluded4.0 million options and 36.9 million warrants because we had a loss from continuing operations.

Note 5 – Investment in Affiliate

Venezuela – Petrodelta

Our 40 percent investment in Petrodelta is owned through our subsidiary, Harvest Holding.   We  continue to account for our investment in Petrodelta under the cost method as we do not exercise significant influence over the operations of Petrodelta.

Under the cost method we will not recognize any equity in earnings from our investment in Petrodelta in our results of operations, but will recognize any cash dividends as income in the period they are received.  

The carrying value of our investment in Petrodelta at June 30, 2016 and December 31, 2015 was nil.

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Note 6 – Venezuela – Other

Harvest Vinccler, S.C.A, a wholly owned subsidiary of Harvest Holding (“Harvest Vinccler”) currently assists us in the oversight of our investment in Petrodelta and in negotiations with PDVSA. Harvest Vinccler’s functional and reporting currency is the United States Dollar (“USD”). They do not have currency exchange risk other than the official prevailing exchange rate that applies to their operating costs denominated in Venezuelan Bolivars (“Bolivars”).

On February 10, 2015, the Ministry of Economy, Finance, and Public Banking, and the Central Bank of Venezuela (BCV) published in the Extraordinary Official Gazette No.6.171 Exchange Agreement No.33 two Official Notices.  The first notice stated that the former auction process, SICAD II, would no longer be permitted.  The second notice established a new exchange rate called the Foreign Exchange Marginal System (“SIMADI”).  The SIMADI’s marginal system was available in limited situations for individuals and companies to purchase and sell foreign currency via banks and exchange houses.  The SIMADI marginal system had been the only exchange mechanism available to Harvest Vinccler. We successfully participated in SIMADI auctions during the three and six months ended June 30, 2015.  Harvest Vinccler exchanged $0.08 million for both periods, and received 199.80 Bolivars per USD. 

On March 9, 2016, the Venezuelangovernment announced a new exchange agreement No. 35 (the “Exchange Agreement No. 35”).  Exchange Agreement No. 35 was published in Venezuela’s Official Gazette No. 40865 dated March 9, 2016, and became effective on March 10, 2016.  Exchange Agreement No. 35 will have a dual exchange rate for a controlled rate (named DIPRO) fixed at DIPRO 10 Bolivars/USD for priority goods and services and a complementary rate (named DICOM) starting at 206.92 Bolivars per USD for travel and other non-essential goods.  During the three and six months ended June 30, 2016, Harvest Vinccler exchanged approximately $0.1 million and $0.1 million, respectively, and received 486.84 Bolivars and 397.74 Bolivars per USD, respectively. 

The monetary assets that are exposed to exchange rate fluctuations are cash, accounts receivable, prepaid expenses and other current assets. The monetary liabilities that are exposed to exchange rate fluctuations are accounts payable, accruals, current and deferred income tax and other tax obligations and other current liabilities. All monetary assets and liabilities incurred at the DIPRO exchange rate are settled at the 10 Bolivar/USD exchange rate. At June 30, 2016, the balances in Harvest Vinccler’s Bolivar denominated monetary assets and liabilities accounts that are exposed to exchange rate changes are 18.1 million Bolivars ($0.04 million)  and 31.5 million Bolivars ($0.06 million), respectively.

Note 7 – Gabon

We are the operator of the Dussafu PSC with a 66.667 percent ownership interest. Located offshore Gabon, adjacent to the border with the Republic of Congo, the Dussafu PSC covers an area of 680,000 acres with water depths up to 1,650 feet.

The Dussafu PSC partners and the Republic of Gabon, represented by the Ministry of Mines, Energy, Petroleum and Hydraulic Resources, entered into the third exploration phase of the Dussafu PSC with an effective date of May 28, 2012. The third exploration phase expired May 27, 2016.    Expiration of the exploration phase has no effect on the discovered fields under the Exclusive Exploitation Authorization (“EEA”) as discussed below.

On March 26, 2014, the joint venture partners approved a resolution that the discovered fields are commercial to exploit.  On June 4, 2014, a Declaration of Commerciality (“DOC”) was signed with Gabon pertaining to four discoveries on the Dussafu Project offshore Gabon.  Furthermore, on July 17, 2014, the Direction Generale Des Hydrocarbures (“DGH”) awarded an EEA for the development and exploitation of certain oil discoveries on the Dussafu Project and on October 10, 2014, the field development plan was approved. The Company has four years from the date of the EEA approval to begin production.

The Company is currently assessing alternatives to farm-down or sell the Dussafu project, while weighing the liquidity requirements necessary to maintain ongoing Company operations.

Operational activities during the six months ended June 30, 2016, included continued evaluation of development plans, based on the 3D seismic data acquired in late 2013 and processed during 2014. 

In June 2016, the Company conducted an impairment analysis of the unproved costs of the Dussafu PSC. The significant factors that impacted the evaluation were price forecasts, drilling costs and the number of companies engaged in evaluating an investment in the property through either a farm-down or acquisition.  Based on the June 2016 evaluation and our continuing operations, it is the opinion of the Company that the current carrying value is recoverable and no impairment to this Dussafu project is warranted as of  June 30, 2016.  If oil and natural gas prices continue to deteriorate or we fail to obtain adequate financing, farm-down or sell the asset, additional impairments may be required on our prospect.

We also reviewed the value of our oilfield inventories that are in the country of Gabon, of which the majority is steel conductor and casing.  At March 31, 2016, based on contemporaneous market prices, we impaired the value of this inventory by another $0.1 million.  At June 30, 2016, we determined no impairment was necessary leaving the value related to the inventory at $2.9 million.  

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See Note 10 – Commitments and Contingencies for a discussion related to our Gabon operations.

The Dussafu PSC represents $30.9 million of unproved oil and natural gas properties including inventory on our June 30, 2016 balance sheet ($31.0 million at December 31, 2015).

Note 8 – Debt and Financing

As described in Note 1 – Organization,  on  June 19, 2015, we issued the CT Warrant, the9% Note, the15% Note and the Additional Draw Notein connection with the Securities Purchase Agreement with CT Energy and received proceeds of $30.6 million, net of financing fees of $1.6 million.  We identified embedded derivative assets and derivative liabilities in the notes and determined that the CT Warrant did not meet the required conditions to qualify for equity classification and was required to be classified as a  warrant derivative liability (see Note 9 – Warrant Derivative Liability).  The estimated fair value, at issuance, of the embedded derivative asset, described below, was $2.5 million, the embedded derivative liability, described below, was $13.5 million and the warrant derivative liability was $40.0 million.  In accordance with ASC 815, the proceeds were first allocated to the fair value of the embedded derivatives and warrant, which resulted in no value being attributable to the 9% Note and the 15% Note.

The following table summarizes the changes in our long-term debt due to related party, net of discount:

	As of June 30,
Long-Term Debt	2016
	(in thousands)
Beginning balance - January 1, 2016	$	214
Increase in  long-term debt due to the capitalization of accrued interest		1,736
Additional borrowings under the 15% Note		3,000
Additional Draw Note borrowing		2,000
Additional Draw Note - premium		447
Accretion of discount on debt		427
	$	7,824

At June 30, 2016, the amended face value of the 15% Note was$30.0 million.  The unamortized discount of the 15% Note was $24.6 million at June 30, 2016 and $25.0 million at December 31, 2015.  The Company will accrete the discount over the life of the 15% Note using the interest method.  Total interest expense for the three months ended June 30, 2016 associated with the15% Note from CT Energy, a related party, was $1.4 million, comprised of $1.1 million related to the stated rate of interest on the note and $0.3 million related to the accretion of the discount on the debt. Total interest expense for the six months ended June 30, 2016 associated with the15% Note from CT Energy, a related party, was $2.5 million, comprised of $2.1 million related to the stated rate of interest on the note and $0.4 million related to the accretion of the discount on the debt.  The fair value of the 15% Note at June 30, 2016 was $9.0 million, calculated using a Monte Carlo simulation.

CT Energy has agreed to lend Harvest $2.0 million per month for up to five months at 15% interest beginning on July 19, 2016, until the earlier of the Closing or the termination of the Share Purchase Agreement. These loans will be made under the Additional Draw Note, which is discussed above under “Securities Purchase Agreement.” The outstanding principal under the Additional Draw Note is $4.0 million, consisting of $2.0million loans by CT Energy on each on June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016.   See Additional Note Note below for further information.

15% Note

On June 19, 2015, in connection with the transaction with CT Energy described in Note 1 – Organization, we issued the 15% Note, afive-year note in the aggregate principal amount of $25.2 million with interest that is compounded quarterly at a rate of 15% per annum and is payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2015.  If by June 19, 2016, the volume weighted average price of the Company’s common stock over any consecutive 30-day period had not equaled or exceeded $2.50 per share, the maturity date of the 15% Note could have been extended by two years and the interest rate on the 15% Note would have been adjusted to 8.0% (the “15% Note Reset Feature”).  The lending of funds under of the Additional Draw Note extended the claim date and 15% Note Reset Feature.  See Additional Draw Note below for additional details.  During an event of default, the outstanding principal amount bears additional interest at a rate of 2.0% per annum higher than the rate otherwise applicable.

On January 4, 2016, the Company and CT Energy executed the first amendment to the 15% Note. The amendment converted the $1.0 million interest payment that would have been due and payable, less applicable withholding tax, into additional principal, such that the new principal amount of the 15% Note to $26.1 million as of January 1, 2016.

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On and effective April 1, 2016, the Company and CT Energy executed a second amendment to the 15% Note. The second amendment converted the $1.0 million interest payment that would have been due and payable on April 1, 2016, less applicable withholding tax, into additional principal, such that the new principal amount of the 15% Note was $27.0 million as of April 1, 2016.

On May 3, 2016, the Company and CT Energy Holding executed and delivered a third amendment to the 15% Note.  The third Amendment increased the principal amount of the 15% Note to $30.0 million to reflect an additional loan of $3.0 million by CT Energy Holding to Harvest.  Additionally, the third amendment converts the $1.1 million accrued interest payment that would have been due and payable on July 1, 2016 less applicable withholding tax, into additional principal, such that the new principal amount of the 15% Note will be $30.9 million effective as of July 1, 2016.  As discussed above in Note 1 – Share Purchase Agreement,  $30.0 million in principal under the 15% Note will be cancelled as partial consideration upon the closing of the proposed sale of the Company’s Venezuelan interests.

The Company may prepay all or a portion of the note at a prepayment price equal to a make-whole price, as of the prepayment date, with respect to the principal amount of the note being prepaid, plus accrued and unpaid interest.  The make-whole price is defined as the greater of (i) 100% of such outstanding principal amount of the 15% Note and (ii)  the sum of the present values as of such date of determination of (A) such outstanding principal amount of the 15% Note, assumed, for the purpose of determining the present value thereof, to be paid on the earlier of the stated maturity of this 15% Note or the date that is two years after the date of determination, and (B) all remaining payments of interest (excluding interest accrued to the prepayment date) scheduled to become due and payable after the date of determination and on or before the date that is two years after the date of determination with respect to such outstanding principal amount of the 15% Note, in the case of each of the foregoing clauses (ii)(A) and (B), computed using a discount rate equal to the Treasury Rate as of the date of determination plus 50 basis points.

If an event of default occurs (other than an event of default related to certain bankruptcy events), holders of at least 25% of the outstanding principal of the 15% Note may declare the principal, premium, if any, and accrued and unpaid interest of such note immediately due and payable.  If an event of default related to specified bankruptcy events occurs, an amount equal to the make-whole price for the 15% Note plus accrued and unpaid interest is immediately due and payable. 

We have evaluated the 15% Note Reset Feature related to the interest rate and maturity date using “ASC 815 Derivatives and Hedging”.  Because the interest rate and maturity date reset are linked to achievement of a certain stock price, the feature is not considered clearly and closely related to the debt host. In addition, the interest rate at the reset date is not tied to any approximation of the expected market rate at the date of the term extension as required by ASC 815.  As a result, we are accounting for the 15% Note Reset Feature as an embedded derivative asset that has been measured at fair value with current changes in fair value reflected in our consolidated condensed statements of operations and comprehensive loss.

The embedded 15% Note Reset Feature in the 15% Note was valued using the ‘with’ and ‘without’ method.  A Black-Derman-Toy (“BDT”) Model, which is a binomial interest rate lattice model, was used to value the 15% Note and the incremental value attributed to the embedded option was determined based on a comparison of the value of the 15% Note with the feature included and without the feature included.  Key inputs into this valuation model are the U.S. Treasury rate, our credit spread and the underlying yield volatility.  As part of our overall valuation process, management employs processes to evaluate and validate the methodologies, techniques and inputs, including review and approval of valuation judgments, methods, models, process controls, and results. These processes are designed to help ensure that the fair value measurements and disclosures are appropriate, consistently applied, and reliable. We estimate the yield volatility for the 15% Note based on historical daily volatility of the USD denominated Venezuela Sovereign zero coupon yield over a look back period of 3.97 years.  The risk-free interest rate is based on the U.S. Treasury yield curve as of the valuation dates for a maturity similar to the expected remaining life of the 15% Note. The credit spread was estimated based on the option adjusted spread (“OAS”) of the Venezuelan yield over the USD Treasury yield and the implied OAS for the transaction as of the date the term sheet was signed to capture the investor’s assessment of the risk in their investment in the Company.  This model requires Level 3 inputs (see Note 3 – Summary of Significant Accounting Policies, Financial Instruments and Fair Value Measurements) which were based on our estimates of the probability and timing of potential future financings and fundamental transactions.

The embedded derivative asset related to the 15% Note contains a Level 3 input related to the probability of our investor lending us additional funds or not lending us funds according to the terms of the loan agreement for the additional draws, as discussed below.  We have assumed a  70/30 scenario (50/50 scenario at December 31, 2015) of the draw or no draw for valuation of the embedded derivative asset. 

The assumptions summarized in the following table were used to calculate the fair value of the derivative asset associated with the 15% Note that was outstanding as of June 30, 2016 on our consolidated condensed balance sheet:

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	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Weighted Term (years)			3.97
Yield Volatility	Level 2 input		40	%
Risk-free rate	Level 1 input		0.9% to 1.1	%
Dividend yield	Level 2 input		0.0	%
Scenario probability:
Claim Date extended with Stock Appreciation Date threshold met	Level 3 input		59.4	%
Claim Date extended with Stock Appreciation Date threshold not met	Level 3 input		36.8	%
Claim Date not extended with Stock Appreciation Date threshold met	Level 3 input		59.4	%
Claim Date not extended with Stock Appreciation Date threshold not met	Level 3 input		34.2	%
Scenario probability (future draws/no future draws)	Level 3 input		70%/30	%

The fair value of the embedded derivative asset related to the 15% Note Reset Featurewas $6.7 millionatJune 30, 2016and $5.0 million at December 31, 2015.  We recognized $1.7 million in changes in fair value of embedded derivative asset in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2016.  We recognized $0.6 million in derivative expense related to this embedded derivative asset and liabilities in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2015.

Additional Draw Note

On June 19, 2015, in connection with the transaction with CT Energy described in Note 1 – Organization, the Company also issued the Additional Draw Note under which CT Energy may elect to provide $2.0 million of additional funds to the Company per month for up to six months following the one-year anniversary of the closing date of the transaction (up to $12.0 million in aggregate).  For funds loaned under the Additional Draw Note, interest will be compounded quarterly at a rate of 15.0% per annum and will be payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2016.  If by the Claim Date, the volume weighted average price of the Company’s common stock over any consecutive 30-day period has not equaled or exceeded $2.50 per share, the maturity date of the Additional Draw Note could have been extended by two years and the interest rate on the Additional Draw Note will adjust to 8.0%, (the “Additional Draw Note Reset Feature”).  However, while CT Energy is making the monthly $2.0 million loans under the Additional Draw Note, as CT Energy currently has committed to do under the Share Purchase Agreement, the Claim Date will be extended. During an event of default, the outstanding principal amount will bear additional interest at a rate of 2.0% per annum higher than the rate otherwise applicable.

The Company may prepay all or a portion of the Additional Draw Note at a prepayment price equal to the make-whole price, as of the prepayment date, with respect to the principal amount of the Additional Draw Note being prepaid, plus accrued and unpaid interest. The make-whole price with respect to the Additional Draw Note has the same meaning described above with respect to the 15% Note.

If an event of default occurs (other than an event of default related to certain bankruptcy events), holders of at least 25% of the outstanding principal of the Additional Draw Note may declare the principal, premium, if any, and accrued and unpaid interest of such note immediately due and payable.  If an event of default related to specified bankruptcy events occurs, an amount equal to the make-whole price for the Additional Draw Note plus accrued and unpaid interest is immediately due and payable.  

As discussed above in Note 1 – Share Purchase Agreement, the outstanding principal under the Additional Draw Note is $4.0 million, consisting of loans of $2.0 million by CT Energy on each of June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016.  Upon the closing of the proposed sale of the Company’s Venezuelan interests, the $80.0 million in cash consideration to be paid by CT Energy would be reduced by the amount of outstanding principal and accrued interest under the Additional Draw Note (and the Additional Draw Note would be cancelled).

At issuance and at December 31, 2015, we assigned no value to the Additional Draw Note or Additional Draw Note Reset Feature, as it did not at issuance meet the definition of derivatives in ASC 815 and there was no principal amount outstanding.  

At June 30, 2016, due to the $2.0 million loaned under the Additional Draw Note on June 20, 2016, we evaluated the Additional Draw Note Reset Feature related to the interest rate and maturity date using “ASC 815 Derivatives and Hedging”.  Because the interest rate and maturity date reset are linked to achievement of a certain stock price, the feature is not considered clearly and closely related to the debt host. In addition, the interest rate at the reset date is not tied to any approximation of the expected market rate at the date of the term extension as required by ASC 815.  As a result, we are accounting for the Additional Draw Note Reset Feature as an

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embedded derivative asset that has been measured at fair value with current changes in fair value reflected in our consolidated condensed statements of operations and comprehensive loss.  The embedded Additional Draw Note Reset Feature in the Additional Draw Note was valued using the same methods and assumptions as the 15% Note Reset Feature discussed above. 

The fair value of the embedded derivative asset related to the Additional Draw Note Reset Feature was $0.4 million at June 30, 2016.  We recognized $0.0 million for the three and six months ended June 30, 2016 in change in fair value of embedded derivative assets in our consolidated condensed statement of operations and comprehensive loss since the fair value at the inception date of June 20, 2016 for the Additional Draw Note Reset Feature approximated the fair value at June 30, 2016. 

Note 9 – Warrant Derivative Liability

CT Warrant

On June 19, 2015, in connection with the transaction with CT Energy described in Note 1 – Organization, we issued the CT Warrant which is exercisable for 34,070,820 shares of the Company’s common stock at an initial exercise price of $1.25 per share.  The CT Warrant may not be exercised until the volume weighted average price of the Company’s common stock over any consecutive 30-day period equals or exceeds $2.50 per share.

The CT Warrant can be exercised at the option of the investor in cash or by effecting a reduction in the principal amount of the 15% Note (See Note 8 – Debt and Financing).  If the CT Warrant is exercised through the reduction in the principal amount of the 15% Note, the reduction will be equal to the amount obtained by multiplying the number of shares of common stock for which the CT Warrant is exercised by (i) the exercise price then in effect divided by (ii) (A) the defined make-whole price with respect to the outstanding principal amount of such 15% Note divided by (B) the outstanding principal amount of such 15% Note.  The exercise price of the CT Warrant is subject to adjustment upon the occurrence of certain events, including stock issuance, dividend or stock split.

In addition, the holder of the CT Warrant has certain registration rights regarding the CT Warrant and the shares of common stock issuable upon exercise of the CT Warrant.

We have analyzed the CT Warrant to determine whether it should be classified as a derivative liability or equity instrument.  Provisions of the CT Warrant agreement allow for a change in the exercise price of the CT Warrant upon the occurrence of certain corporate events.  These exercise price adjustments incorporate variables other than those used to determine the fair value of a fixed-for-fixed forward or option on equity shares therefore the CT Warrant is not considered to be “indexed to the issuer’s own stock” and does not meet the exception from derivative treatment in ASC 815.  We continue to account for the CT Warrant as a derivative which was marked to market as of June 30, 2016.  

Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Monte Carlo model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair value, our income will reflect the volatility in these estimate and assumption changes.  A Monte Carlo simulation model is used to value the CT Warrant to estimate if the Stock Appreciation Date is achieved, which is based on the average stock price over a 30 day period (21 trading days) reaching $2.50.  This requires Level 3 inputs (see Note 3 – Summary of Significant Accounting Policies, Financial Instruments and Fair Value Measurements) which are fundamentally based on market data but require complex modeling.  The additional modeling is required in order to simulate future stock prices, to determine whether the Stock Appreciation Date is achieved and to model the projected exercise behavior of the warrant holders.

The assumptions summarized in the following table were used to calculate the fair value of the warrant derivative liability that was outstanding as of the balance sheet date presented on our consolidated condensed balance sheet:

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	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Stock price	Level 1 input	$	0.84
Exercise price	Level 1 input	$	1.25
Stock appreciation date price (hurdle)	Level 1 input	$	2.50
Term (warrants)			1.9681
Term (Claim Date)			0.0519
Term (Claim Date extended)			0.4699
Volatility	Level 2 input		135.0	%
Risk-free rate (warrants)	Level 1 input		0.63	%
Risk-free rate (Claim Date)	Level 1 input		0.37	%
Risk-free rate (Claim Date extended)	Level 1 input		0.41	%
Dividend yield	Level 2 input		0.0	%

Inherent in the Monte Carlo valuation model are assumptions related to expected stock price volatility, expected life, risk-free interest rate and dividend yield. As part of our overall valuation process, management employs processes to evaluate and validate the methodologies, techniques and inputs, including review and approval of valuation judgments, methods, models, process controls, and results. These processes are designed to help ensure that the fair value measurements and disclosures are appropriate, consistently applied, and reliable. We estimate the volatility of our common stock based on historical volatility that matches the expected remaining life of the longest instrument in the transaction, seven years. The risk-free interest rate is based on the U.S. Treasury yield curve as of the valuation dates for a maturity similar to the expected remaining life of the CT Warrant. The expected life of the CT Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which we anticipate to remain at zero.

The fair value of the CT Warrant was $16.4 million at June 30, 2016and $5.5 million at December 31, 2015.  We recognized$6.9million and $10.9 million, respectively, in change in fair value of warrant liabilities in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2016.  We recognized income of $2.4 million in change in fair value of warrant liabilities in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2015.

Note 10 – Commitments and Contingencies

We have various contractual commitments pertaining to leasehold, training, and development costs for the Dussafu PSC totaling $4.5 million. Under the EEA granted for the Dussafu PSC on July 17, 2014, we are required to commence production within four years of the date of grant in order to preserve our rights to production under the EEA.  We expect that significant capital expenditures will be required prior to commencement of production. These work commitments are non-discretionary; however, we do have the ability to control the pace of expenditures.

Under the agreements with our partner in the Dussafu PSC, we are jointly and severally liable to various third parties. As of June 30, 2016, the gross carrying amount associated with obligations to third parties which were fixed at the end of the period was $0.1 million ($0.3 million as of December 31, 2015) and is related to accounts payable to vendors, accrued expenses and withholding taxes payable to taxing authorities. As we are currently the operator for the Dussafu PSC, the gross carrying amount related to accounts payable and withholding taxes are reflected in the consolidated condensed balance sheet in accounts payable.  The net amount related to other accrued expenses is reflected in accrued expenses in the consolidated condensed balance sheet. Our partners have obligations totaling $36thousand as of June 30, 2016  ($0.1 million as of December 31, 2015) to us for these liabilities. As we expect our partners will continue to meet their obligations to fund their share of expenditures, we have not recognized any additional liability related to fixed joint interest obligations attributable to our joint interest partners. 

The following related class action lawsuits were filed on the dates specified in the United States District Court, Southern District of Texas: John Phillips v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (March 22, 2013); Sang Kim v. Harvest Natural Resources, Inc., James A. Edmiston, Stephen C. Haynes, Stephen D. Chesebro’, Igor Effimoff, H. H. Hardee, Robert E. Irelan, Patrick M. Murray and J. Michael Stinson (April 3, 2013); Chris Kean v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 11, 2013); Prastitis v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 17, 2013); Alan Myers v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 22, 2013); and Edward W. Walbridge and the Edward W. Walbridge Trust v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 26, 2013). The complaints allege that the Company made certain false or misleading public statements and demand that the defendants pay unspecified damages to the class action plaintiffs based on stock price declines. All of these actions have been consolidated into the John Phillips v. Harvest Natural Resources, Inc., James A. Edminston and Stephen C. Haynes (March 22, 2013).  

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The Company and the other named defendants have filed a motion to dismiss and intend to vigorously defend the consolidated lawsuits.  We are currently unable to estimate the amount or range of any possible loss.

In May 2012, Newfield Production Company (“Newfield”) filed notice pursuant to the Purchase and Sale Agreement between Harvest (US) Holdings, Inc. (“Harvest US”), a wholly owned subsidiary of Harvest, and Newfield dated March 21, 2011 (the “PSA”) of a potential environmental claim involving certain wells drilled on the Antelope Project. The claim asserts that locations constructed by Harvest US were built on, within, or otherwise impact or potentially impact wetlands and other water bodies. The notice asserts that, to the extent of potential penalties or other obligations that might result from potential violations, Harvest US must indemnify Newfield pursuant to the PSA. In June 2012, we provided Newfield with notice pursuant to the PSA (1) denying that Newfield has any right to indemnification from us, (2) alleging that any potential environmental claim related to Newfield’s notice would be an assumed liability under the PSA and (3) asserting that Newfield indemnify us pursuant to the PSA. We dispute Newfield’s claims and plan to vigorously defend against them.  We are currently unable to estimate the amount or range of any possible loss.

On February 27, 2015, Harvest (US) Holdings, Inc. (“Harvest US”), a wholly owned subsidiary of Harvest, Branta, LLC and Branta Exploration & Production Company, LLC   filed a complaint against Newfield in the United States District Court for the District of Colorado. The plaintiffs previously sold oil and natural gas assets located in Utah’s Uinta Basin to Newfield pursuant to two Purchase and Sale Agreements, each dated March 21, 2011. In the complaint, the plaintiffs allege that, prior to the sale, Newfield breached separate confidentiality agreements with Harvest US and Branta by discussing the auction of the assets with a potential bidder for the assets, which caused the potential bidder not to participate in the auction and resulted in a depressed sales price for the assets. The complaint seeks damages and fees for breach of contract, violation of the Colorado Antitrust Act, violation of the Sherman Antitrust Act and tortious interference with a prospective business advantage. In September 2015, plaintiffs amended their complaint to add Ute Energy, LLC and Crescent Point Energy Corporation as defendants. Subsequently, plaintiffs agreed to dismiss with prejudice all claims against Ute Energy, LLC and Crescent Point Energy Corporation.

On May 31, 2011, the United Kingdom branch of our subsidiary, Harvest Natural Resources, Inc. (UK), initiated a wire transfer of approximately $1.1 million ($0.7 million net to our 66.667 percent interest) intending to pay Libya Oil Gabon S.A. (“LOGSA”) for fuel that LOGSA supplied to our subsidiary in the Netherlands, Harvest Dussafu, B.V., for the company’s drilling operations in Gabon. On June 1, 2011, our bank notified us that it had been required to block the payment in accordance with the U.S. sanctions against Libya as set forth in Executive Order 13566 of February 25, 2011, and administered by OFAC, because the payee, LOGSA, may be a blocked party under the sanctions. The bank further advised us that it could not release the funds to the payee or return the funds to us unless we obtain authorization from OFAC. On October 26, 2011, we filed an application with OFAC for return of the blocked funds to us. Until that application is approved, the funds will remain in the blocked account, and we can give no assurance when OFAC will permit the funds to be released. On April 23, 2014, we received a notice that OFAC had denied our October 26, 2011 application for the return of the blocked funds.  During the year ended December 31, 2015 primarily due to the passage of  time, we recorded a $0.7 million allowance for doubtful accounts to general and administrative costs associated with the blocked payment and $0.4 million receivable from our joint venture partner.   On October 13, 2015, we filed a request that OFAC reconsider its decision and on March 8, 2016 OFAC denied our October 13, 2015 request for the return of blocked funds; however, the Company will continue attempts to recover the funds from OFAC.

Uracoa Municipality Tax Assessments. Harvest Vinccler, a subsidiary of Harvest Holding, has received nine assessments from a tax inspector for the Uracoa municipality in which part of the Uracoa, Tucupita and Bombal fields are located as follows:

· Three claims were filed in July 2004 and allege a failure to withhold for technical service payments and a failure to pay taxes on the capital fee reimbursement and related interest paid by PDVSA under the Operating Service Agreement (“OSA”). Harvest Vinccler has filed a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss one of the claims and has protested with the municipality the remaining claims.

· Two claims were filed in July 2006 alleging the failure to pay taxes at a new rate set by the municipality. Harvest Vinccler has filed a protest with the Tax Court in Barcelona, Venezuela, on these claims.

· Two claims were filed in August 2006 alleging a failure to pay taxes on estimated revenues for the second quarter of 2006 and a withholding error with respect to certain vendor payments. Harvest Holding has filed a protest with the Tax Court in Barcelona, Venezuela, on one claim and filed a protest with the municipality on the other claim.

· Two claims were filed in March 2007 alleging a failure to pay taxes on estimated revenues for the third and fourth quarters of 2006. Harvest Vinccler has filed a protest with the municipality on these claims.

Harvest Vinccler disputes the Uracoa tax assessments and believes it has a substantial basis for its positions based on the interpretation of the tax code by SENIAT (the Venezuelan income tax authority), as it applies to operating service agreements, Harvest Holding has filed claims in the Tax Court in Caracas against the Uracoa Municipality for the refund of all municipal taxes paid since 1997.  Any potential liability for the Uracoa tax assessents would remain the responsibility of Harvest Vinccler upon the closing of the proposed sale of our Venezuelan interests.

Libertador Municipality Tax Assessments. Harvest Vinccler has received five assessments from a tax inspector for the Libertador municipality in which part of the Uracoa, Tucupita and Bombal fields are located as follows:

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· One claim was filed in April 2005 alleging the failure to pay taxes at a new rate set by the municipality. Harvest Vinccler has filed a protest with the Mayor’s Office and a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss the claim. On April 10, 2008, the Tax Court suspended the case pending a response from the Mayor’s Office to the protest. If the municipality’s response is to confirm the assessment, Harvest Holding will defer to the Tax Court to enjoin and dismiss the claim.

· Two claims were filed in June 2007. One claim relates to the period 2003 through 2006 and seeks to impose a tax on interest paid by PDVSA under the OSA. The second claim alleges a failure to pay taxes on estimated revenues for the third and fourth quarters of 2006. Harvest Vinccler has filed a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss both claims.

· Two claims were filed in July 2007 seeking to impose penalties on tax assessments filed and settled in 2004. Harvest Vinccler has filed a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss both claims.

Harvest Vinccler disputes the Libertador allegations set forth in the assessments and believes it has a substantial basis for its position. As a result of the SENIAT’s interpretation of the tax code as it applies to operating service agreements, Harvest Vinccler has filed claims in the Tax Court in Caracas against the Libertador Municipality for the refund of all municipal taxes paid since 2002.

On May 4, 2012, Harvest Vinccler learned that the Political Administrative Chamber of the Supreme Court of Justice issued a decision dismissing one of Harvest Vinccler’s claims against the Libertador Municipality. Harvest Vinccler continues to believe that it has sufficient arguments to maintain its position in accordance with the Venezuelan Constitution. Harvest Vinccler plans to present a request of Constitutional Revision to the Constitutional Chamber of the Supreme Court of Justice once it is notified officially of the decision. Harvest Vinccler has not received official notification of the decision. Harvest Vinccler is unable to predict the effect of this decision on the remaining outstanding municipality claims and assessments.

On January 15, 2015, HNR Finance and Harvest Vinccler S.C.A submitted a Request for Arbitration against the Government of Venezuela before the International Centre for Settlement of Investment Disputes ("ICSID") regarding HNR Finance's interest in Petrodelta.  The Request for Arbitration set forth numerous claims, including (a) the failure of the Venezuelan government to approve the Company’s negotiated sale of its 51 percent interest in Harvest Holding to Petroandina on any reasonable grounds in 2013-2014, resulting in the termination of the SPA (b) the failure of the Venezuelan government to approve the Company’s previously negotiated sale of its interest in Petrodelta to PT Pertamina (Persero) on any reasonable grounds in 2012-2013, resulting in the termination of a purchase agreement entered into between HNR Energia and PT Pertamina (Persero); (c) the failure of the Venezuelan government to allow Petrodelta to pay approved and declared dividends for 2009; (d) the failure of the Venezuelan government to allow Petrodelta to approve and declare dividends since 2010, in violation of Petrodelta’s bylaws and despite Petrodelta’s positive financial results between 2010 and 2013; (e) the denial of Petrodelta’s right to fully explore the reserves within its designated areas; (f) the failure of the Venezuelan government to pay Petrodelta for all hydrocarbons sales since Petrodelta’s incorporation, recording them instead as an ongoing balance in the accounts of PDVSA, the Venezuelan government-owned oil company that controls Venezuela’s 60 percent interest in Petrodelta, and as a result disregarding Petrodelta’s managerial and financial autonomy; (g) the failure of the Venezuelan government to pay Petrodelta in US dollars for the hydrocarbons sold to PDVSA, as required under the mixed company contract; (h) interference with Petrodelta’s operations, including PDVSA’s insistence that PDVSA and its affiliates act as a supplier of materials and equipment and provider of services to Petrodelta; (i) interference with Petrodelta’s financial management, including the use of low exchange rates Bolivars/US dollars to the detriment of the Company and to the benefit of the Venezuelan government, PDVSA and its affiliates; and (j) the forced migration of the Company’s investment in Venezuela from an operating services agreement to a mixed company structure in 2007.

On January 26, 2015, Petroandina, which owns a 29 percent interest in Harvest Holding, filed a complaint for breach of contract against the Company and its subsidiary HNR Energia in the Court of Chancery of the State of Delaware (“Court of Chancery”).  The complaint states that HNR Energia breached provisions of the Shareholders Agreement between Petroandina and HNR Energia, which provisions require HNR Energia to provide advance notice of, and deposit $5.0 million into an escrow account, before bringing any claim against the Venezuelan government. Under those provisions, if Petroandina so requests, an appraisal of Petroandina's 29 percent interest in Harvest Holdings must be performed, and Petroandina has the right to require HNR Energia to purchase that 29 percent interest at the appraised value.  Petroandina's claim requests that, among other things, the court (a) declare that HNR Energia has breached the Shareholders' Agreement by submitting the Request for Arbitration against the Venezuelan government on January 15, 2015 (which Request for Arbitration was subsequently withdrawn without prejudice); (b) declare that the Company has breached its guaranty of HNR Energia's obligations under the Shareholders' Agreement; (c) direct the Company and HNR Energia to refrain from prosecuting any legal proceeding against the Venezuelan government (including the previously filed Request for Arbitration) until such time as they have complied with the relevant provisions of the Shareholders' Agreement; (d) award Petroandina costs and fees related to the lawsuit; and (e) award Petroandina such other relief as the court deems just and proper.  On January 28, 2015, the Court of Chancery issued an injunction ordering the Company and HNR Energia to withdraw the Request for Arbitration and not take any action to pursue its claims against Venezuela until Harvest and HNR Energia have complied with the provisions of the Shareholders’ Agreement or otherwise reached an agreement with Petroandina.  Accordingly, on January 28, 2015, HNR Finance B.V. and Harvest Vinccler S.C.A. withdrew without prejudice the Request for Arbitration. In the Delaware proceeding, the Company and HNR Energia have until August 23, 2016 to respond to Petroandina’s complaint.  We are currently unable to estimate the amount or range of any possible loss.

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On  July 12, 2016, Petroandina filed a claim against the Company and HNR Energia in the Court of Chancery of the State of Delaware alleging that, by entering into the Share Purchase Agreement with CT Energy, the Company and HNR Energia breached the Shareholders’ Agreement. Petroandina filed this claim by amending the breach of contract claim previously filed in the Chancery Court on January 26, 2015.  The July 12, 2016 complaint requests that the Court of Chancery grant an injunction to prevent the Company and HNR Energia from completing the proposed transaction with CT Energy.  A hearing before the Court of Chancery regarding Petroandina’s injunction request is scheduled for August 16, 2016.  The Company currently is vigorously defending its right to complete the proposed transaction with CT Energy under the terms of the Share Purchase Agreement. 

We are a defendant in or otherwise involved in other litigation incidental to our business. In the opinion of management, there is no such incidental litigation that will have a material adverse effect on our financial condition, results of operations and cash flows.

Note 11 – Operating Segments

We regularly allocate resources to and assess the performance of our operations by segments that are organized by unique geographic and operating characteristics. The segments are organized in order to manage regional business, currency and tax related risks and opportunities. Operations included under the heading “United States” include corporate management, cash management, business development and financing activities performed in the United States and other countries, which do not meet the requirements for separate disclosure. All intersegment revenues, other income and equity earnings, expenses and receivables are eliminated in order to reconcile to consolidated totals. Corporate general and administrative and interest expenses are included in the United States segment and are not allocated to other operating segments. Segment loss and operating segment assets for prior periods have been adjusted to conform to the current presentation method in which intersegment items are eliminated from each segment’s results and assets. 

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Segment Loss Attributable to Harvest
Venezuela	$	(258)	$	(85)	$	(2,820)	$	(108)
Gabon		(213)		(934)		(1,023)		(2,848)
Indonesia		—		(2)		—		(55)
United States and other		(12,427)		(24,404)		(23,151)		(28,031)
Net loss attributable to Harvest (a)	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)

a) Net of net loss attributable to noncontrolling interest owners.

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)
Operating Segment Assets
Venezuela	$	115	$	5,290
Gabon		31,259		32,710
Indonesia		—		5
United States and other		11,060		9,776
Total assets	$	42,434	$	47,781

Note 12 – Related Party Transactions

The noncontrolling interest owners in Harvest Holdings, Vinccler (currently owning 20 percent) and Petroandina (currently owning 29 percent) are both related parties of the Company. 

On January 4, April 1, and May 3, 2016, Harvest entered into first, second and third amendments, respectively, to the 15% Note.  Each amendment eliminated an interest payment and increased the principal amount of the 15% Note by the amount of the eliminated interest payment, less applicable withholding tax of $0.1 million for January 4 and April 1, 2016. Additionally, the third amendment also increased the principal amount of the 15% Note by $3.0 million in connection with additional funds received from CT Energy. 

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After taking into account the third amendment, the outstanding principal amount of the 15% Note was  $30.9 million as of July 1, 2016.

On January 4, 2016, HNR Finance provided a loan to CT Energia in the amount of $5.2 million under an 11.0% promissory note due 2019 (the “CT Energia Note”). The purpose of the loan is to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta that is 40% owned by HNR Finance and through which Harvest’s Venezuelan oil and natural gas interests are held. The loans to Petrodelta are to assist Petrodelta in satisfying its working capital needs and discharging its obligations. Interest on the CT Energia Note is due and payable on the first of each January and July, commencing July 1, 2016. The full amount outstanding, including any unpaid accrued interest, is due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan is the payments of principal and interest from loans that CT Energia has made to Petrodelta. If and when CT Energia receives payments of principal or interest from loans it has made to Petrodelta, then those proceeds must be used to pay unpaid interest and principal under the CT Energia Note. No interest payments under the CT Energy note have been made as of August 8, 2016.  All payments made by CT Energia to HNR Finance under the CT Energia Note must be made in U.S. Dollars.  The source of funds for HNR Finance’s $5.2 million loan to CT Energia was a capital contribution from Harvest Holding, which, in return, received the same aggregate amount of capital contributions from its shareholders, pro rata according to their equity interests in Harvest Holding. Of that aggregate amount of capital contributions, HNR Energia contributed $2.6 million, which was a capital contribution from Harvest.    The Management Agreement the Company entered into with CT Energia also makes CT Energia a related party.  During the three months ended March 31, 2016, we recorded a $5.2 million allowance to fully reserve the CT Energia Note due to concerns related to the continued deteriorating economic conditions in Venezuela and our assessment relating to the probability that the CT Energia Note will be collected and we are not accruing interest on this note receivable. 

On June 20, 2016, CT Energy, loaned $2.0 million to the Company, pursuant to the Additional Draw Note. As previously disclosed, Harvest sold the Additional Draw Note to CT Energy pursuant to Securities Purchase Agreement. The Securities Purchase Agreement provides that CT Energy can elect to loan, under the Additional Draw Note, $2.0 million to Harvest per month for up to six months beginning on June 20, 2016. The June 20, 2016 loan is, and any additional loans under the Additional Draw Note will be, secured by substantially all of the Harvest’s assets, including equity in certain of Harvest’s subsidiaries, as further described in the security agreement that was executed in connection with the Securities Purchase Agreement.  

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Harvest Natural Resources, Inc. (“Harvest” or the “Company”) cautions that any forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) contained in this report or made by management of the Company involve risks and uncertainties and are subject to change based on various important factors. When used in this report, the words “budget”, “forecast”, “expect”, “believes”, “goals”, “projects”, “plans”, “anticipates”, “estimates”, “should”, “could”, “assume” and similar expressions are intended to identify forward-looking statements. In accordance with the provisions of the Securities Act and the Exchange Act, we caution you that important factors could cause actual results to differ materially from those in any forward-looking statements. These factors, among other factors, the failure to obtain the requisite stockholder approvals of the proposed sale of our Venezuelan interests; the possibility that the closing conditions to the proposed sale of our Venezuelan interests may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant a necessary regulatory approval; delay in closing the proposed sale of our Venezuelan interests or the possibility of non-consummation of the transaction; the occurrence of any event that could give rise to termination of the Share Purchase Agreement; risks related to the disruption of the proposed sale of our Venezuelan interests to Harvest and its management; the effect of announcement of the proposed sale of our Venezuelan interests on Harvest’s ability to retain and hire key personnel and maintain relationships with its partners, suppliers and other third parties; difficult global economic and commodity and capital markets conditions; changes in the legal and regulatory environment; our concentration of operations in Venezuela; political and economic risks associated with international operations (particularly those in Venezuela); anticipated future development costs for undeveloped reserves; drilling risks; risk that actual results may vary considerably from reserve estimates; the dependence on the abilities and continued participation of our key employees; risks normally incident to the exploration, operation and development of oil and natural gas properties; risks incumbent to being a noncontrolling interest stockholder in a corporation; permitting and drilling of oil and natural gas wells; availability of materials and supplies necessary to projects and operations; prices for oil and natural gas and related financial derivatives; changes in interest rates; our ability to acquire oil and natural gas properties that meet our objectives; availability and cost of drilling rigs and seismic crews; political stability; civil unrest; acts of terrorism; currency and exchange risks; currency controls; changes in existing or potential tariffs, duties or quotas; changes in taxes; changes in governmental policy; lack of liquidity; availability of sufficient financing; estimates of amounts and timing of sales of securities; changes in weather conditions; our ability to continue as a going concern; and other risks, including those discussed in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”), which includes certain definitions and a summary of significant accounting policies and should be read in connection with this report, and other public filings.

Executive Summary

Recent Developments

On and effective as of April 1, 2016, the Company and CT EnergyHolding SRL, a Barbados Society with Restricted Liability (“CT Energy”), executed and delivered a second amendment (the "Second Amendment") to the 15% Note, dated June 19, 2015, as amended by the First Amendment, effective as of December 31, 2015, payable by Harvest to CT Energy in the principal amount of $26.1 million. The Second Amendment converted the $1.0 million interest payment that was due and payable on April 1, 2016 and converted such amount, less applicable withholding tax, into additional principal, such that the current principal amount of the 15% Note as of April 1, 2016, was $27.0 million.

On April 25, 2016, the Company received a notice from the New York Stock Exchange (“NYSE”) stating that the Company is not in compliance with a NYSE continued listing requirement, which provides that a company is not in compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders’ equity is less than $50 million.  As required by NYSE rules, the Company notified the NYSE that, within 45 days of receipt of the notice, the Company will submit a business plan that demonstrates its ability to regain compliance within 18 months. The NYSE accepted our plan on July 14, 2016, and we are now subject to quarterly monitoring for compliance with the plan. If the Company fails to comply with the business plan the NYSE may commence suspension and delisting procedures.

On and effective as of May 3, 2016, the Company and CT Energy, executed and delivered a third amendment (the "Third Amendment") to the 15% Note, dated June 19, 2015, as amended by the First Amendment, effective as of December 31, 2015, and the Second Amendment, effective as of April 1, 2016 payable by Harvest to CT Energy in the principal amount of $27.0 million. The Third Amendment increases the principal amount of the 15% Note to $30.0 million to reflect an additional loan of $3.0 million by CT Energy to Harvest and converted the $1.1 million interest payment that was due and payable on July 1, 2016, less applicable withholding tax, into additional principal, such that the current principal amount of the 15% Note as of July 1, 2016, was $30.9 million.

On June 20, 2016, CT Energy, loaned $2.0 million to the Company, pursuant to a 15% non-convertible senior secured note, dated June 19, 2015 (the “Additional Draw Note”). As previously disclosed, Harvest sold the Additional Draw Note to CT Energy pursuant to a securities purchase agreement, dated June 19, 2015 (the “Securities Purchase Agreement”). The Securities Purchase Agreement provides that CT Energy can elect to loan, under the Additional Draw Note, $2.0 million to Harvest per month for up to six

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months beginning on June 20, 2016. The June 20, 2016 loan is, and any additional loans under the Additional Draw Note will be, secured by substantially all of the Harvest’s assets, including equity in certain of Harvest’s subsidiaries, as further described in the security agreement that was executed in connection with the Securities Purchase Agreement.   CT Energy’s June 20, 2016 loan to Harvest extends the original claim date of June 19, 2016 (“Claim Date”) under the Securities Purchase Agreement to July 19, 2016 and CT Energy’s July 19, 2016 loan to Harvest extends the Claim Date to August 19, 2016. The Claim Date was set to expire on June 20, 2016, the business day following the one-year anniversary of the execution of the Securities Purchase Agreement, but CT Energy can extend the Claim Date on a month-by-month basis, for up to six months, by making the $2.0 million monthly loans under the Additional Draw Note. Upon the expiration of the Claim Date, among other previously-disclosed consequences, CT Energy’s governance rights under the Securities Purchase Agreement would terminate (but only if the volume weighted average price of Harvest’s common stock over any 30-day period had failed to equal or exceed $2.50 per share before the Claim Date).

Share Purchase Agreement

On June 29, 2016, the Company, and its wholly owned subsidiary, HNR Energia B.V. (“ HNR Energia”), entered into a share purchase agreement (the “Share Purchase Agreement”) with CT Energy, pursuant to which HNR Energia agreed to sell to CT Energy the 51 percent interest in Harvest Vinccler Dutch-Holding B.V. (“Harvest Holding”) owned by HNR Energia.  See Part I – Financial Information, Item 1 – Financial Statements, Note 1 – Organization – Securities Purchase Agreement for further information.

Operations

Venezuela

Our 40 percent investment in Petrodelta is owned through our subsidiary, Harvest Holding.   We  continue to account for our investment in Petrodelta under the cost method as we do not exercise significant influence over the operations of Petrodelta.  We will continue to monitor this situation in future periods.

Under the cost method we will not recognize any equity in earnings from our investment in Petrodelta in our results of operations, but will recognize any cash dividends as income in the period they are received.  

During the three months ended June 30, 2016, Petrodelta sold approximately 3.62 million barrels of oil (“MMBO”) for a daily average of 39,763 barrels of oil per day (“BOPD”), an increase of five percent over the same period in 2015 and nine percent lower than the previous quarter. 

During the six months ended June 30, 2016, Petrodelta sold approximately 7.58 MMBO for a daily average of 41,635 BOPD, an increase of seven percent over the same period in 2015.

During the three months ended June 30, 2016 Petrodelta drilled and completed one development well which was in the El Salto field.   During the six months ended June 30, 2016, Petrodelta drilled and completed seven development wells which six wells were in the El Salto field and one well was in the Temblador field.  Currently, Petrodelta is operating four drilling rigs and one workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador fields.  During three and six months ended June 30, 2015, Petrodelta drilled and completed six and ten development wells, respectively. 

Petrodelta continues to experience lower revenues due to the decrease in oil prices, higher operating costs due to operational inefficiencies and the exchange rate imbalance, as well as production and drilling issues.

We performed an impairment analysis of the carrying value of our investment of Petrodelta as of December 31, 2015 due to the continued decline in world oil prices and deteriorating economic conditions in Venezuela which have significantly impacted Petrodelta’s operations.  During 2015, Petrodelta’s operating costs exceeded the price realized from the sale of its production due to the significant rate of inflation in Venezuela and the restrictive foreign currency exchange system which Petrodelta is required to operate under.  Based on the existing economic environment in which Petrodelta is required to operate, we have concluded that the estimated fair value of our investment in Petrodelta is nil and we recorded a pre-tax impairment charge of $164.7 million to fully impair our investment in Petrodelta as of December 31, 2015. The estimated fair value of our investment was determined based on the estimated fair value of Petrodelta’s oil and natural gas properties and other net liabilities as of December 31, 2015 which exceeded the estimated fair value of the oil and natural gas properties.

Dussafu Project – Gabon

We have a 66.667 percent ownership interest in the Dussafu PSC through two separate acquisitions, and we are the operator. The third exploration phase of the Dussafu PSC expired on May 27, 2016.  The expiration of the exploration phase has no effect on the discovered fields under the Exclusive Exploitation Authorization (“EEA”) as discussed below. All expenditure commitments on this exploration phase have been completed.

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On March 26, 2014, the joint venture partners approved a resolution that the discovered fields are commercial to exploit.  On June 4, 2014, a Declaration of Commerciality (“DOC”) was signed with Gabon pertaining to four discoveries on the Dussafu Project offshore Gabon.  Furthermore, on July 17, 2014, the Direction Generale Des Hydrocarbures (“DGH”) awarded an EEA for the development and exploitation of certain oil discoveries on the Dussafu Project and on October 10, 2014, the field development plan was approved. The Company has four years from the date of the EEA approval to begin production.  In order to begin production by July 2018, the current project plan is to develop the area surrounding our Ruche well first, followed by the development of the other fields and drilling selected high quality exploration prospects identified on 3D seismic. 

Operational activities during the six months ended June 30, 2016, included continued evaluation of development plans, based on the 3D seismic data acquired in late 2013 and processed during 2014. 

Central/Inboard 3D seismic data acquired in 2011 has been processed and interpreted to evaluate prospectivity. We have also completed processing data from the 1,260 sq. km 3D seismic survey acquired during the fourth quarter of 2013. This survey provides 3D coverage over the outboard portion of the block and has confirmed significant pre-salt prospectivity which had been inferred from 2D seismic data. The new 3D seismic data also covers the Ruche, Tortue and Moubenga discoveries and we expect will facilitate the effective placement of future development wells in the Ruche and Tortue development program, as well as allowing improved assessment of the numerous undrilled structures already identified on older 3D seismic surveys.

During the six months ended June 30, 2016, we had cash capital expenditures of $0.1 million for a site survey ($0.4 million for facility design costs during the six months ended June 30, 2015

The Company is considering options to develop, sell or farm-down the Dussafu PSC in order to obtain the maximum value from this asset, while maintaining the required liquidity to continue our current operations. 

Since approval of the Field Development Plan (“FDP”) in October 2014, Harvest has continued the development of the Ruche Exclusive Exploitation Area. A tender for all necessary subsea equipment was concluded in January 2015 where prices exceeded the costs employed in the FDP. We continue to negotiate with the lowest priced vendors and continue to revise the development scheme to bring the projected cost back to the FDP levels. The depth volume from the 2013 3D seismic acquisition over the discovered fields and the outboard area of the license was received and interpreted. This data was incorporated into our reservoir models and optimization of well trajectories to maximize oil recovery continues. In addition, the prospect inventory was updated and several prospects have been high graded for drilling in 2016 or 2017. To accommodate the drilling schedule, a site survey, including bathymetry and geophysical data gathering with respect to prospects A/B, 6/7 and 8/9, was completed in August 2015. A tender for a drilling rig for the planned well is in progress.

Harvest and its joint venture partner engaged a third-party contractor to undertake a fixed-price, geophysical site survey over multiple potential well locations in the Dussafu block in August 2015.  The survey was a pre-requisite for siting mobile drilling units and other installations required for continuing exploration and development activities over the license.  The survey provided information regarding the seabed and shallow geological conditions, which is essential for safe siting and operation of these installations.

In June 2016, the Company conducted an impairment analysis of the unproved costs of the Dussafu PSC. The significant factors that impacted the evaluation were price forecasts, drilling costs and the number of companies engaged in evaluating an investment in the property through either a farm-down or acquisition.  Based on the June 2016 evaluation and our continuing operations, it is the opinion of the Company that the current carrying value is recoverable and no impairment to this Dussafu project is warranted as of June 30, 2016.

Results of Operations

The following discussion on results of operations for the three and six months ended June 30, 2016 and 2015 should be read in conjunction with our consolidated condensed financial statements and related notes thereto.

Three Months Ended June 30, 2016 and 2015

We reported a net loss attributable to Harvest of $12.9 million, or $0.25 per share, for the three months ended June 30, 2016, compared with a net loss attributable to Harvest of $25.4 million, or $0.60 per share, for the three months ended June 30, 2015.

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(Income) Loss From Continuing Operations

Expenses and other non-operating (income) expense from continuing operations were:

	Three Months Ended June 30,
	2016		2015		Change
	(in thousands)
Depreciation and amortization	$	14	$	27	$	(13)
Exploration expense		418		575		(157)
General and administrative		4,573		5,517		(944)
Change in fair value of warrant liabilities		6,853		(2,418)		9,271
Change in fair value of derivative assets and liabilities		(1,696)		(557)		(1,139)
Interest expense		1,373		614		759
Loss on issuance of debt and warrants		—		20,402		(20,402)
Foreign currency transaction gains and other		(38)		(77)		39
Transaction costs related to sale of Harvest Holding		1,551		—		1,551
Income tax expense		8		1,604		(1,596)
Loss from continuing operations	$	13,056	$	25,687	$	(12,631)

Our accounting method for oil and natural gas properties is the successful efforts method. During the three months ended June 30, 2016, we incurred $0.2 million of exploration costs for the processing and reprocessing of seismic data related to ongoing operations in Gabon and $0.2 million related to other general business development activities. During the three months ended June 30, 2015, we incurred $0.4 million of exploration costs for the processing and reprocessing of seismic data related to ongoing operations in Gabon and $0.2 million related to other general business development activities.

The  decrease  in general and administrative costs for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 was primarily due to lower employee related costs ($0.7 million) and  general operations and overhead ($0.4 million), offset by higher professional fees and contract services ($0.2 million).  Employee costs were lower between periods primarily due to a $0.7 million decrease in certain stock-based compensation expense impacted by the change in the Company’s stock price offset by increase in other compensation for directors’ fees and stock option expense. General business and overhead costs were higher due to a decrease in costs allocated to projects during the three months ended June 30, 2016.Contract services were lower primarily related to lower legal fees incurred for general corporate legal expense.

The change in fair value of warrant liabilities of $6.9 million during the three months ended June 30, 2016, is primarily related to the change in our stock price.  As the price of our stock has increased during the three months ended June 30, 2016, the fair value of the warrant liability also increased.  See Part I – Financial Information, Item 1 – Financial Statements, Note 9 – Warrant Derivative Liability for further information.

The change in fair value of embedded derivative assets of $1.7 million is directly related to the assumptions surrounding the commencement of the interest rate reset features in both the 15% and the Additional Draw Notes.  The interest rate reset features both lowers the interest rate and extends the due date of the 15% and the Additional Draw Notes. At June 30, 2016, the probability of the interest rate reset feature date being delayed was lowered to 70% and the value of the embedded derivative asset related to the Additional Draw Note was added.  Both of these changes increased the value of the embedded derivative assets for the three months ended June 30, 2016.  See Part I – Financial Information, Item 1 – Financial Statements, Note 8 – Debt and Financing for further information.

The increase in interest expense for the three months ended June 30, 2016 compared to the three months ended June 30, 2015 was primarily due to higher outstanding debt balances and accretion of debt discount during the three months ended June 30, 2016. 

As discussed in Part I – Financial Information, Item 1 – Financial Statements, Note 1 – Organization – Securities Purchase Agreement, on June 19, 2015, we issued a $25.2 million, five year, 15.0% non-convertible senior secured promissory note (the “15% Note”),  a $7.0 million, five year, 9.0% convertible senior secured note (the “9% Note”), a warrant to purchase up to 34,070,820 shares of Harvest's common stock at an initial exercise price of $1.25 per share (the “CT Warrant”) and a five-year 15.0% non-convertible senior secured note (the “Additional Draw Note”) in connection with the Securities Purchase Agreement with CT Energy and received proceeds of $30.6 million, net of financing fees of $1.6 million.  We identified embedded derivative asset and liabilities in the notes and determined that the warrant did not meet the required conditions to qualify for equity classification and is required to be classified as a warrant liability (see Part I – Financial Information, Item 1 – Financial Statements, Note 11 – Warrant Derivative Liabilities).  The estimated fair value, at issuance, of the embedded derivative asset was $2.5 million, the embedded derivative liability was $13.5 million and the warrant was $40.0 million.  In accordance with ASC 815, the fair value of the financial instruments was first allocated to the embedded derivatives and warrants, the 9% and 15% notes. As a result of the allocation we recognized a loss on

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the issuance of these securities of $20.4 million in our consolidated condensed statements of operations and comprehensive loss for the three months ended June 30, 2015.

We incurred $1.6 million of transaction costs associated with the Share Purchase Agreement with CT Energy for the three months ended June 30, 2016.  See Part I – Financial Information, Item 1 – Financial Statements, Note 1 – Organization – Share Purchase Agreementfor further information. 

We had an income tax expense for the three months ended June 30, 2016 of $8thousand compared to an income tax expense of $1.6 million for the three months ended June 30, 2015.  The expense during thethree months ended June 30, 2016was primarily attributable to income tax owed to the Venezuelan taxing authorities.  The expense for the three months ended June 30, 2015 was primarily attributable to an increase in the deferred tax liability associated with the Company’s undistributed earnings from its foreign subsidiaries.  In the fourth quarter of 2014, we reinstated a valuation allowance against the Company’s U.S. deferred tax assets as we determined that we would not have sufficient taxable income in the U.S. after the termination of the sale of the remaining equity interest in Harvest Holdings to realize the deferred tax asset.  Through 2015 and the second quarter of 2016, the Company has continued recording a valuation allowance against its U.S. deferred tax assets. 

Net Loss Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests was $0.2 million for the three months ended June 30, 2016 compared to net loss attributable to noncontrolling interests of $0.3 million for the three months ended June 30, 2015.  The net losses attributable to noncontrolling interests during the three months ended June 30, 2016 and 2015 were related to our ongoing operations at Harvest Vinccler as they continue oversight of our investment in Petrodelta. 

Six Months Ended June 30, 2016 and 2015

We reported a net loss attributable to Harvest of $27.0 million, or $0.53 diluted earnings per share, for the six months ended June 30, 2016, compared with a net loss attributable to Harvest of $31.0 million, or $0.73 diluted earnings per share, for the six months ended June 30, 2015.

Loss From Continuing Operations

Expenses and other non-operating (income) expense from continuing operations were:

	Six Months Ended June 30,
	2016		2015		Change
	(in thousands)
Depreciation and amortization	$	40	$	56	$	(16)
Exploration expense		1,139		2,507		(1,368)
Impairment expense - oilfield inventories		128		—		128
Reserve for  note receivable - related party		5,160		—		5,160
General and administrative		10,522		9,675		847
Change in fair value of warrant liabilities		10,914		(2,418)		13,332
Change in fair value of derivative assets and liabilities		(1,687)		(557)		(1,130)
Interest expense		2,469		851		1,618
Loss on issuance of debt and warrants		—		20,402		(20,402)
Foreign currency transaction gains and other		(192)		(80)		(112)
Transaction costs related to sale of Harvest Holding		1,551		—		1,551
Income tax expense		16		1,220		(1,204)
Loss from continuing operations	$	30,060	$	31,656	$	(1,596)

Our accounting method for oil and gas properties is the successful efforts method. During the six months ended June 30, 2016, we incurred $0.8 million of exploration costs for the processing and reprocessing of seismic data related to ongoing operations in Gabon and $0.3 million related to other general business development activities. During the six months ended June 30, 2015, we incurred $2.3 million of exploration costs for the processing and reprocessing of seismic data related to ongoing operations in Gabon and $0.2 million related to other general business development activities.

During the six months ended June 30, 2016, we incurred $0.1 million of impairment expense for the oilfield inventory related to the Dussafu PSC. During the six months ended June 30, 2015, we incurred no impairment expense.

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During the six months ended June 30, 2016, we recorded a $5.2 million allowance to fully reserve the CT Energia Note due to concerns related to the continued deteriorating economic conditions in Venezuela and our assessment relating to the probability that the CT Energia Note will be collected.

The increase in general and administrative costs for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 was primarily due to higher employee related costs ($0.7 million), general operations and overhead ($0.2 million), and taxes other than income, public relations and travel ($0.1 million) to offset by lower professional fees and contract services ($0.1 million).  Employee costs were higher between periods primarily due other compensation related to directors’ fees and stock options ($0.5 million) and certain stock-based compensation expense impacted by the change in the Company’s stock price ($0.1 million).

The change in fair value of warrant liabilities of $10.9 million during the six months ended June 30, 2016, is primarily related to the change in our stock price.  As the price of our stock has increased during the three months ended June 30, 2016, the fair value of the warrant liability also increased.  See Part I – Financial Information, Item 1 – Financial Statements, Note 9 – Warrant Derivative Liability for further information.

The change in fair value of embedded derivative assets of 1.7 million is directly related to the assumptions surrounding the commencement of the interest rate reset features in both the 15% and the Additional Draw Notes.  The interest rate reset features both lowers the interest rate and extends the due date of the 15% and the Additional Draw Notes.  At June 30, 2016, the probability of the interest rate reset feature date being delayed was lowered to 70% and the value of the embedded derivative asset related to the Additional Draw Note was added.  Both of these changes increased the value of the embedded derivative assets for the six months ended June 30, 2016.  See Part I – Financial Information, Item 1 – Financial Statements, Note 8 – Debt and Financing for further information.

The increase in interest expense for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 was primarily due to higher outstanding debt balancesand accretion of debt discount during the six months ended June 30, 2016. 

As discussed in Part I – Financial Information, Item 1 – Financial Statements, Note 1 – Organization – Securities Purchase Agreement, on June 19, 2015, we issued the 15% Note,  the 9% Note, the CT Warrant and the Additional Draw Note in connection with the Securities Purchase Agreement with CT Energy and received proceeds of $30.6 million, net of financing fees of $1.6 million.  We identified embedded derivative asset and liabilities in the notes and determined that the warrant did not meet the required conditions to qualify for equity classification and is required to be classified as a warrant liability (see Note 11 – Warrant Derivative Liabilities).  The estimated fair value, at issuance, of the embedded derivative asset was $2.5 million, the embedded derivative liability was $13.5 million and the warrant was $40.0 million.  In accordance with ASC 815, the fair value of the financial instruments was first allocated to the embedded derivatives and warrants, the 9% and 15% notes. As a result of the allocation we recognized a loss on the issuance of these securities of $20.4 million in our consolidated condensed statements of operations and comprehensive loss for the three and six months ended June 30, 2015.

We recognized a $0.2 million gain on foreign currency transactions for the six months ended June 30, 2016 compared to a $0.1 million gain on foreign currency transactions for the six months ended June 30, 2015.  The gains in 2016 and 2015 were primarily associated with a favorable change in the Bolivar denominated liabilities. 

We incurred $1.6 million of transaction costs associated with the Share Purchase Agreement with CT Energy for the six months ended June 30, 2016.  See Part I – Financial Information, Item 1 – Financial Statements, Note 1 – Organization – Share Purchase Agreementfor further information. 

We had an income tax expense for the six months ended June 30, 2016 of $16 thousand compared to an income tax expense of $1.2 million for the six months ended June 30, 2015.  The expense during the six months ended June 30, 2016 was primarily attributable to income tax owed to the Venezuelan taxing authorities.  The expense for the six months ended June 30, 2015 was primarily attributable to an increase in the deferred tax liability associated with the Company’s undistributed earnings from its foreign subsidiaries.  In the fourth quarter of 2014, we reinstated a valuation allowance against the Company’s U.S. deferred tax assets as we determined that we would not have sufficient taxable income in the U.S. after the termination of the sale of the remaining equity interest in Harvest Holding.  We have not recognized a tax benefit on the Company’s losses arising during the six months ended June 30, 2015. 

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Net Loss Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests was $3.1 million for the six months ended June 30, 2016 compared to net loss attributable to noncontrolling interests of $0.6 million for the six months ended June 30, 2015.  The net losses attributable to noncontrolling interests during the six months ended June 30, 2016 and 2015 were related to our ongoing operations at Harvest Vinccler as they continue oversight of our investment in Petrodelta.  The net loss during 2016 was primarily due to the $5.2 million allowance to fully reserve the CT Energia Note.

Risks, Uncertainties, Capital Resources and Liquidity

The following discussion on risks, uncertainties, capital resources and liquidity should be read in conjunction with our consolidated condensed financial statements and related notes thereto.

Liquidity

We expect that for 2016 we will not generate revenue, will continue to generate losses from operations, and our cash flows will not be sufficient to cover our operating expenses. Therefore, expected continued losses from operations, capital needs and uses of cash will be funded through debt or equity financings, farm-downs, delay of the discretionary portion of our capital spending to future periods or operating cost reductions.  Our ability to continue as a going concern depends on our ability to complete the transaction under the Share Purchase Agreement and the success of our planned exploration and development activities in Gabon.  There can be no guarantee of future capital acquisition, fundraising or exploration success or that we will realize the value of our exploration and exploitation acreage and suspended wells.  Our current cash position and our inability to access additional capital may limit our available opportunities or not provide sufficient cash for operations.

Our primary ongoing sources of cash are issuances of debt, the anticipated CT Energy Transaction and the sale or farm-down of oil and natural gas properties in Gabon. Our primary use of cash has been to fund oil and natural gas exploration projects, principal payments on debt, interest payments, and general and administrative costs. We require capital principally to fund the exploration and development of new oil and natural gas properties. We have various contractual commitments pertaining to exploration, development and production activities.  See Part I – Financial Information, Item 1 – Financial Statements, Note 10 – Commitments and Contingencies for our contractual commitments.

On January 4, April 1, and May 3, 2016, Harvest entered into first, second and third amendments, respectively, to the 15% Note.  Each amendment eliminated an interest payment and increased the principal amount of the 15% Note by the amount of the eliminated interest payment, less applicable withholding tax of $0.1 million for January 4 and April 1. Additionally, the third amendment also increased the principal amount of the 15% Note by $3.0 million in connection with additional funds received from CT Energy.  After taking into account the third amendment, the outstanding principal amount of the 15% Note was $30.9 million effective as of July 1, 2016.  There can be no assurance that we will be able to amend our loan agreement with CT Energy to increase the principal amount of the 15% Note if our liquidity position does not allow us to make future interest payments when due.

As further discussed in Part I – Financial Information, Item 1 – Financial Statements, Note 1 – Share Purchase Agreement – Additional Funding, CT Energy loaned the Company $2.0 million on each of June 20, 2016 and July 19, 2016 under the Additional Draw Note, which the Company originally sold to CT Energy under the Securities Purchase Agreement. Amounts outstanding under the Additional Draw Note are secured by substantially all of Harvest’s assets, including equity in certain of Harvest’s subsidiaries, as further described in the security agreement that was executed in connection with the Securities Purchase Agreement.

We are currently assessing alternatives for our Gabon asset and we intend to continue our consideration of a possible sale or farm-down of our Gabon asset if we are able to negotiate a sale or sales in transactions that our Board of Directors believes are in the best interests of the Company and its stockholders.   Given that we do not currently have any operating cash inflows, we may also decide to access additional capital through equity or debt sales; however, there can be no assurance that such financing will be available to the Company or on terms that are acceptable to the Company.

On December 2, 2015, the Company received notification from the New York Stock Exchange (“NYSE”) that the Company was not in compliance with the NYSE's continued listing standards, which require a minimum average closing price of $1.00 per share over 30 consecutive trading days.  Under the NYSE's rules, Harvest has a period of six months from the date of the NYSE notice to bring its share price and 30 trading-day average share price back above $1.00.  During this period, the Company’s common stock will continue to be traded on the NYSE under the symbol “HNR”, subject to the Company’s compliance with other NYSE continued listing requirements, but will be assigned the notation .BC after the listing symbol to signify that the Company is not currently in compliance with the NYSE’s continued listing standards.  As required by the NYSE, in order to maintain its listing, Harvest notified the NYSE that it intends to cure the price deficiency.

On April 25, 2016, the Company received a notice from the NYSE stating that the Company is not in compliance with a second NYSE continued listing requirement, which provides that a company is not in compliance if its average global market capitalization

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over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders’ equity is less than $50 million.  As required by NYSE rules, the Company notified the NYSE that, within 45 days of receipt of the notice, the Company will submit a business plan that demonstrates its ability to regain compliance within 18 months. The NYSE accepted our plan on July 14, 2016, and we are now subject to quarterly monitoring for compliance with the plan. If the Company fails to comply with the business plan the NYSE may commence suspension and delisting procedures.

Failure to generate sufficient cash flow, raise additional capital through debt or equity financings, complete the Share Purchase Agreement transaction, farm-downs, or reduce operating costs could have a material adverse effect on our ability to meet our short- and long-term liquidity needs and achieve our intended long-term business objectives.

The above circumstances raise substantial doubt about our ability to continue as a going concern.  While we believe the issuance of additional equity securities, short- or long-term debt financing, completion of the Share Purchase Agreement transaction, farm-downs, the delay of the discretionary portion of our capital spending to future periods or operating cost reductions could be put into place which would not jeopardize our operations and future growth plans, there can be no assurance that such events will be successful.

Our financial statements have been prepared under the assumption that we will continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business.  The accompanying consolidated condensed financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that could result should we be unable to continue as a going concern.

Accumulated Undistributed Earnings of Foreign Subsidiaries

Under Accounting Standards Codification 740-30-25-17, no deferred tax liability should be recorded if sufficient evidence shows that the subsidiary has invested or will invest these undistributed earnings or that these earnings will be remitted in a tax-free manner. Management must consider numerous factors in determining timing and amounts of possible future distribution of these earnings to the parent company and whether a U.S. deferred tax liability should be recorded for these earnings. These factors include the future operating and capital requirements of both the parent company and the subsidiaries, remittance restrictions imposed by foreign governments or financial agreements, and tax consequences of the remittance, including possible application of U.S. foreign tax credits and limitations on foreign tax credits that may be imposed by the Internal Revenue Code and regulations.

As of June 30, 2016, the book-tax outside basis difference in our foreign subsidiary resulting from unremitted earnings was zero due to the pre-tax impairment of the Company’s remaining investment in Petrodelta of $164.7 million during the year ended December 31, 2015.  Consequently, the Company has not recorded a deferred tax liability associated with these foreign earnings. 

Working Capital and Cash Flows

The net funds raised or used in each of the operating, investing and financing activities are summarized in the following table and discussed in further detail below:

	Six Months Ended June 30,
	2016		2015
	(in thousands)
Net cash used in operating activities	$	(5,442)	$	(10,870)
Net cash used in investing activities		(5,443)		(353)
Net cash provided by financing activities		5,924		23,518
Net increase (decrease) in cash	$	(4,961)	$	12,295

	As of June 30,		As of December 31,
	2016		2015
	(in thousands, except ratios)
Working capital (deficit)	$	(5,277)	$	6,232
Current ratio		0.4		2.3
Total cash	$	2,800	$	7,761
Total debt (net of discount)	$	7,824	$	214

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At June 30, 2016, the amended face value of the 15% Note was $30.0 million.  The unamortized discount was $24.6 million at June 30, 2016. The Company will accrete the discount over the life of the notes using the interest method. 

Working Capital

The decrease in working capital of $11.5 million between December 31, 2015 and June 30, 2016 was primarily due to cash used to fund our loss from operations and capital expenditures offset by the receipt of $1.7 million Internal Revenue Service (“IRS”) income tax receivable accrued in prior periods. 

Cash Flow from Operating Activities

During the six months ended June 30, 2016, net cash used in operating activities was approximately $5.4 million ($10.9 million during the six months ended June 30, 2015). The $5.5 million decrease in use of cash was primarily due to lower net loss from continuing operations, and decrease in accounts receivable offset by increases in accrued expense, accounts payable and accrued interest. The receipt of the $1.7 million IRS income tax refund was received in February 2016. We paid no cash for interest expense during 2016 ($0.5 million during 2015). 

Cash Flow from Investing Activities

Our cash capital expenditures for property and equipment are summarized in the following table:

	Six Months Ended June 30,
	2016		2015
	(in thousands)
Dussafu PSC	$	88	$	353
Other administrative property		195		—
Total additions of property and equipment	$	283	$	353

During the six months ended June 30, 2016 we:

· Provided a loan to CT Energia for $5.2 million under an 11.0% promissory note due 2019

Our only investing activities during the six months ended June 30, 2015 were capital expenditures.

Cash Flow from Financing Activities

During the six months ended June 30, 2016 we:

· Received $5.0 million in proceeds from the 15% Note and Additional Draw Note;

· Received $0.9 million in contributions from noncontrolling interest owners.

During the six months ended June 30, 2015 we:

· Repaid $7.6 million of our note payable to Petroandina and repaid $1.3 million of our note payable to CT Energy;

· Received $33.5 million in proceeds from issuance of debt;

· Received $0.2 million in contributions from noncontrolling interest owners;

· Incurred $1.2 million in legal and other fees associated with the issuance debt.

Effects of Changing Prices, Foreign Exchange Rates and Inflation

Our results of operations and cash flow are affected by changing oil prices. Fluctuations in oil prices may affect our total planned development activities and capital expenditure program.

Our net foreign exchange gain attributable to our international operations was $0.2 million for the six months ended June 30, 2016 compared to a $0.1 million gain on foreign currency transactions for the six months ended June 30, 2015.  The gains in 2016 and 2015 are primarily associated with favorable changes in the Bolivar denominated liabilities. There are many factors affecting foreign exchange rates and resulting exchange gains and losses, most of which are beyond our control. It is not possible for us to predict the extent to which we may be affected by future changes in exchange rates and exchange controls.

Harvest Vinccler’s functional and reporting currency is the U.S. Dollar. They do not have currency exchange risk other than the official prevailing exchange rate that applies to their operating costs denominated in Venezuela Bolivars (“Bolivars”).

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Within the United States and other countries in which we conduct business, inflation has had a minimal effect on us, but it is an important factor with respect to certain aspects of the results of operations in Venezuela. The inflation rate in Venezuela for the year ended December 31, 2015 was 180.9 percent.

Off-Balance Sheet Arrangements

The $5.2 million note receivable from CT Energy created an off-balance sheet risk. The purpose of the loan was to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta which is 40% owned by HNR Finance and through which Harvest’s Venezuelan oil and natural gas interests are held. The loans to Petrodelta were to assist Petrodelta in satisfying its working capital needs and discharging certain obligations.  The full amount outstanding, including any unpaid accrued interest, is due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan is the payments of principal and interest from loans that CT Energia has made to Petrodelta. If and when CT Energia receives payments of principal or interest from loans it has made to Petrodelta, then those proceeds must be used to prepay unpaid interest and principal under the CT Energia Note.   Interest on the CT Energia Note is due and payable on the first of each January and July, commencing July 1, 2016.  No interest payments have been made under the CT Energy note as of August 8, 2016.

During the three months ended March 31, 2016, we recorded a $5.2 million allowance to fully reserve the CT Energia Note due to concerns related to the continued deteriorating economic conditions in Venezuela and our assessment relating to the probability that the CT Energia Note will be collected.  As of June 30, 2016 the CT Energia Note remains fully reserved and we are not accruing interest on this note receivable.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from adverse fluctuations in oil and natural gas prices and foreign currency exchange, as discussed in our 2015 Form 10-K. Our outlook with regards to market risk for the six months ended June 30, 2016 does not differ materially from that discussed in the 2015 Form 10-K.

Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

We have established disclosure controls and procedures designed to ensure that the disclosure requirement in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Security and Exchange Commission’s rules and forms and that such information is accumulated and effectively communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management of the Company, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based on their evaluation as of June 30, 2016, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at such time.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended June 30, 2016 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II.     OTHER INFORMATION

Item 1.     Legal Proceedings

See Part I –Financial Information, Item 1- Financial Statements, Note 10 – Commitments and Contingencies and our 2015 Form 10-K for a description of certain legal proceedings, including material developments in such legal proceedings.

Item 1A.  Risk Factors

We face a number of significant risks and uncertainties in our business, which are detailed in the “Risk Factors” sections of our Annual Report on Form 10-K for the year ended December 31, 2015, as well as summarized in this report under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties may affect our current position and future prospects and should be considered carefully in evaluating us and an investment in our common stock.

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The following risk factors related to the proposed sale of our Venezuelan interests, which is further discussed in Part I – Financial Information, Item 1 – Financial Statements, Note 1 – Share Purchase Agreement, supplement risk factors contained in Part I. 1A of our 2015 Form 10-K:

While the proposed sale of our Venezuelan interests is pending, it creates uncertainty about our future that could have a material adverse effect on our business, financial condition and results of operations.

While the proposed sale of our Venezuelan interests is pending, it creates uncertainty about our future. As a result of this uncertainty, our current or potential business partners may decide to delay, defer or cancel entering into new business arrangements with us pending completion or termination of the proposed sale. In addition, while the proposed sale is pending, we are subject to a number of risks, including:

· the diversion of management and employee attention from our day-to-day business;

· the potential disruption to business partners and other service providers; and

· the possible inability to respond effectively to competitive pressures, industry developments and future opportunities.

The occurrence of any of these events individually or in combination could have a material adverse effect on our business, financial condition and results of operation.

There is no assurance that the proposed sale of our Venezuelan interests will be completed, and our inability to consummate the proposed sale could harm the market price of our common stock and our business, results of operations and financial condition.

If our stockholders fail to authorize the proposed sale of our Venezuelan interests, or if the proposed sale is not completed for any other reason, the market price of our common stock may decline. In addition, failure to complete the proposed sale will result in a reduction in the amount of cash otherwise available to us and, given that we do not currently have any operating cash flow, may substantially limit our ability to implement our business strategy.

We cannot assure you that the proposed sale of our Venezuelan interests will be consummated. The consummation of the proposed sale is subject to the satisfaction or waiver of a number of conditions, including, among others, (i) the requirement that we obtain stockholder approval of the proposed sale, including approvals by both the holders of a majority of our outstanding common stock and the holders of a majority of our outstanding common stock held by stockholders other than CT Energy or its affiliates; (ii) the requirement that we obtain approval of the proposed sale from the Government of Venezuela; (iii) the requirement that Petroandina waive its rights under the Shareholders’ Agreement or exercise its change of control put right; (iv) requirements with respect to the accuracy of the representations and warranties of the parties to the Share Purchase Agreement; and (v) requirements with respect to the satisfaction or waiver of the covenants and obligations of the parties to the Share Purchase Agreement. In addition, the Share Purchase Agreement may be terminated in certain circumstances under the terms of the Share Purchase Agreement.

We cannot guarantee that the parties to the Share Purchase Agreement will be able to meet all of the closing conditions. If we are unable to meet all of the closing conditions, CT Energy would not be obligated to close the proposed sale of our Venezuelan interests. We also cannot be sure that circumstances, such as a material adverse effect, will not arise that would also allow CT Energy to terminate the Share Purchase Agreement before the closing. If the proposed sale is not approved by our stockholders or does not close for another reason, our Board will be forced to evaluate other alternatives, which may be less favorable to us than the current proposed sale.

If the Share Purchase Agreement is terminated:

· because (i) the conditions to closing the sale have not been satisfied or waived within 30 days after we have received stockholder approval, or (ii) because our stockholders do not approve the proposed sale, and we receive an acquisition proposal after the date of the Share Purchase Agreement or a proposal becomes publicly known, and in either case is not withdrawn, before the termination of the Share Purchase Agreement, then we will be required to pay CT Energy a break-up fee of $4.6 million and pay all of our debt to CT Energy (including any associated make-whole premiums) if, in certain circumstances, within 12 months of termination of the share purchase agreement we execute a definitive agreement with respect to, or our Board recommends, an alternative acquisition proposal and we subsequently consummate that alternative transaction;

· because our Board has determined to enter into an alternative acquisition agreement with respect to a superior proposal, then we will be required to pay CT Energy a break-up up fee of $4.6 million and pay all of our debt to CT Energy (including any associated make-whole premiums);

· because our Board has changed its recommendation to our stockholders to vote for the proposed sale or we have intentionally committed a breach of our obligations under the share purchase agreement regarding alternative acquisition proposals, then we will be required to pay CT Energy a break-up fee of $4.6 million; or

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· because we have breached or failed to perform any of our representations, warranties, covenants or other agreements in the Share Purchase Agreement (other than those regarding alternative acquisition proposals) and failed to cure the breach within the applicable cure period, then we will be required to pay CT Energy a break-up fee of $4.6 million.

We will not be entitled to draw on the $15 million available under the Letter of Credit provided by CT Energy at the signing of the Share Purchase Agreement and retain the proceeds of that draw, unless:

· the Share Purchase Agreement is terminated because of CT Energy’s uncured breach of or failure to perform under any of its representations, warranties, covenants or other agreements in the Share Purchase Agreement; or

· the Share Purchase Agreement is terminated at a point when all closing conditions have been satisfied, including receipt of approval by our stockholders, but excluding obtaining the Venezuelan approval and satisfaction of those conditions that can only be satisfied by CT Energy at the closing.

CT Energy has agreed to make certain monthly loans to us to fund our transaction expenses and operations until the closing. If the Share Purchase Agreement is terminated for any reason, there can be no assurance that CT Energy will continue to provide these funds after the date of termination. In addition, if the proposed sale of our Venezuelan interests is not consummated, our directors, executive officers and other employees will have expended extensive time and effort during the pendency of the sale and we will have incurred significant transaction costs, in each case without any commensurate benefit.

We are required to obtain the approval of the sale of our Venezuelan interests from the Ministerio del Poder Popular de Petroleo y Mineria, representing the Government of Venezuela. There can be no assurances that we will be able to obtain this approval, or that we will be able to obtain this approval on terms reasonably satisfactory to us and CT Energy. If this approval is not obtained, then the Share Purchase Agreement may be terminated. See Documents Governing the Proposed Sale – Share Purchase Agreement – Termination. In two previous proposed transactions, we were unable to obtain the approval of the Government of Venezuela to sell certain of our Venezuelan interests. We believe these proposed transactions did not succeed because the level of financial support the prospective purchasers offered to Petrodelta to carry on future Petrodelta operations was not sufficient to obtain the approval of the Government of Venezuela.

Closing of the transaction is also conditioned on receipt of the waiver by Petroandina of its rights under the Shareholders’ Agreement with respect to the sale of our Venezuelan interests, including any obligation of CT Energy to become a party to the Shareholders’ Agreement, or the exercise by Petroandina of its change of control put right to sell its 29% interest in Harvest Holding to CT Energy at the same time as HNR Energia sells its interests.

We may not be able to reach an amicable solution to the allegations of Petroandina that our transaction with CT Energy is in breach of the Shareholders’ Agreement.

On July 12, 2016, Petroandina filed a claim against us in the Court of Chancery in the State of Delaware alleging that by entering into the Share Purchase Agreement we breached the Shareholders’ Agreement. The claim requests that the Court of Chancery grant an injunction barring us from completing our transaction with CT Energy. While we are currently vigorously defending our right to complete our transaction with CT Energy (provided that we comply with the change of control put right provisions of the Shareholders’ Agreement), there can be no assurances that we will be successful in this defense or in ultimately coming to an amicable resolution with Petroandina regarding these matters.

If the proposed sale of our Venezuelan interests is not completed, there may not be any other offers from potential acquirors.

If the proposed sale of our Venezuelan interests is not completed, we may seek another purchaser for our interests in Venezuela. There can be no assurances that we would be able to enter into meaningful discussions or to otherwise complete any transaction with any other party who may have an interest in purchasing our Venezuelan interests on terms acceptable to us.

Our directors and executive officers may have interests in the proposed sale that are different from, or in addition to, the interests they may have as stockholders.

In accordance with the terms of certain pre-existing agreements, our directors and executive officers may receive certain change of control payments as a result of the consummation of the proposed sale of our Venezuelan interests, or as a result of the combination of the consummation of the proposed sale and a termination event under the applicable agreement. Accordingly, our directors and executive officers may have interests in the proposed sale that are difference from, or in addition to, the interests of our stockholders generally.

The opinion of the financial advisor to the Special Committee does not reflect changes in circumstances that may have occurred after the date of the opinion.

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On June 29, 2016, the date the Share Purchase Agreement was executed, the financial advisor to the Special Committee delivered its opinion to the Special Committee that, based upon and subject to the assumptions, limitations and qualifications set forth in the opinion and based upon such other matters as the financial advisor to the Special Committee considered relevant, the consideration to be received by Harvest and HNR Energia pursuant to the Share Purchase Agreement was fair from a financial point of view to Harvest. The opinion of the financial advisor to the Special Committee speaks only as of the time it was rendered and not as of the closing of the proposed sale or any other time. Changes in circumstances that have or may occur after the date of the opinion of the financial advisor to the Special Committee could significantly alter the value, facts or elements on which the opinion was based.

There is no guarantee that you will receive any of the net cash proceeds from the proposed sale of our Venezuelan interests in the form of dividends.

The purchase price for the sale of our interests in Venezuela will be paid directly to us. After the payment of expenses related to the proposed sale (including taxes) and reservation of some of the proceeds for operating costs and contingent liabilities, any use of the remaining proceeds will be at the discretion of our Board and based on its determination of what is in the best interests of Harvest and its stockholders at the time of determination. Our Board could decide that we should use all or a significant portion of the net cash proceeds from the sale for purposes other than to pay dividends to stockholders, including continuing our business.

We cannot assure you that our common stock will continue to meet NYSE continued listing standards after the consummation of the proposed sale of our Venezuelan interests.

If the proposed sale of our Venezuelan interests is consummated, our assets will consist of cash and our interests in of Gabon. The NYSE’s continued listing requirements provide that a listed company’s securities can be delisted if the company’s operating assets have been substantially reduced. While we intend to take all necessary actions to cause our common stock to continue to be listed on the NYSE, there can be no assurances that NYSE will not seek to delist our common stock based on our post-closing asset base. We expect that any determination by the NYSE would be influenced by our strategy going forward, including the continued operation of our Gabon interests, after the closing, a matter that remains subject to our Board’s discretion. The delisting of our common stock from the NYSE would adversely impact liquidity of our common stock and could damage the trading price of our common stock.

Item 6.     Exhibits

(a) Exhibits

2.1	Securities Purchase Agreement, dated as of June 19, 2015, between the Company, Harvest (US) Holding, Inc., Harvest Natural Resources, Inc. (UK), Harvest Offshore China Company, and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed on June 22, 2015).
2.2	Share Purchase Agreement, dated as of June 29, 2016, by and among CT Energy Holding SRL, HNR Energia B.V. and the Company (incorporated by reference to our Form 8-K filed with the SEC on June 30, 2016).
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Form 10-Q filed on November 9, 2010).
3.1.1	Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to our Registration Statement on Form S-3 filed on September 29, 2015).
3.1.2	Certificate of Designations of Series C Preferred Stock of the Company filed on June 19, 2015 (incorporated by reference to our Form 8-K filed on June 22, 2015).
3.1.3	Certificate of Elimination of Preferred Stock, Series C of Harvest Natural Resources, Inc. dated February 19, 2016 (Incorporated by reference to our form 8-K filed on February 19, 2016.
3.2	Restated Bylaws as of May 15, 2015 (incorporated by reference to our Form 8-K filed on May 15, 2015).
4.1	Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Form 10-K filed on March 17, 2008).
4.2	Third Amended and Restated Rights Agreement, dated as of August 23, 2007, between the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 99.3 to our Form 8-A12G filed on October 23, 2007).
4.2.1	Amendment to Third Amended and Restated Rights Agreement, dated as of October 28, 2010, between the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 4.1 to our Form 8-K filed on October 29, 2010).
4.2.2	Second Amendment to Third Amended and Restated Rights Agreement, dated as of February 1, 2013, between the Company and Wells Fargo Bank, N.A., as Rights Agent (incorporated by reference to Exhibit 4.1 to our Form 8-K filed on February 4, 2013).

40

4.2.3	Third Amendment to Third Amended and Restated Rights Agreement, dated as of April 24, 2015, between the Company and Wells Fargo Bank, N.A. (incorporated by reference to our Form 8-K filed with the SEC on April 24, 2015).
4.2.4	Fourth Amendment to Third Amended and Restated Rights Agreement, dated as of June 19, 2015, between the Company and Wells Fargo Bank, N.A., as rights agent (incorporated by reference to our Form 8-K filed on June 22, 2015).
4.3	Warrant Purchase Agreement, dated as of October 28, 2010, between the Company and MSD Energy Investments Private II, LLC (incorporated by reference to Exhibit 4.2 to our Form 8-K filed on October 29, 2010).
4.4	Common Stock Purchase Warrant No. W-1, dated as of October 28, 2010, between the Company and MSD Energy Investments Private II, LLC (incorporated by reference to Exhibit 4.3 to our Form 8-K filed on October 29, 2010).
4.5	Common Stock Purchase Warrant No. W-2, dated as of October 28, 2010, between the Company and MSD Energy Investments Private II, LLC (incorporated by reference to Exhibit 4.4 to our Form 8-K filed on October 29, 2010).
4.6	Indenture (including Form of Note), dated as of October 11, 2012, between the Company and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 to our Form 8-K filed on October 15, 2012).
4.7	Warrant Agreement (including Form of Warrant), dated as of October 11, 2012, between the Company and U.S. Bank National Association, as Warrant Agent (incorporated by reference to Exhibit 4.3 to our Form 8-K filed on October 15, 2012).
4.8	15% Non-Convertible Senior Secured Promissory Note Due 2020, dated June 19, 2015, between the Company and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on June 22, 2015).
4.8.1	First Amendment to 15% Non-Convertible Senior Secured Promissory Note Due 2020, effective as of December 31, 2015, between the Company and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on January 7, 2016).
4.8.2	Second Amendment to 15.0% Non-Convertible Senior Secured Promissory Note Due 2020, effective as of April 1, 2016, between Harvest Natural Resources, Inc. and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on April 7, 2016).
4.8.3	Third Amendment to 15.0% Non-Convertible Senior Secured Promissory Note Due 2020, effective as of May 3, 2016, between Harvest Natural Resources, Inc. and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on May 9, 2016).
4.9	9% Convertible Senior Secured Note Due 2020, dated June 19, 2015, between the Company and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on June 22, 2015).
4.10	15% Additional Draw Senior Secured Note Due 2020, dated June 19, 2015, between the Company and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on June 22, 2015).
4.11	Common Stock Purchase Warrant, dated as of June 19, 2015, issued to CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on June 22, 2015).
10.1	Second Amendment to 15.0% Non-Convertible Senior Secured Promissory Note Due 2020, effective as of April 1, 2016, between the Company and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on April 7, 2016).
10.1.1	Third Amendment to 15.0% Non-Convertible Senior Secured Promissory Note Due 2020, dated May 3, 2016, between the Company and CT Energy Holding SRL (incorporated by reference to our Form 8-K filed with the SEC on May 9, 2016).
31.1*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer.
31.2*	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer.
32.1**	Certification accompanying Quarterly Report on Form 10-Q pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350 of Chief Executive Officer.
32.2**	Certification accompanying Quarterly Report on Form 10-Q pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350 of Chief Financial Officer.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Schema Document
101.CAL*	XBRL Calculation Linkbase Document
101 DEF*	XBRL Definition Linkbase Document
101.LAB*	XBRL Label Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document

* Filed herewith.

**Furnished herewith.

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HARVEST NATURAL RESOURCES, INC.

Dated: August9, 2016	By:	/s/ James A. Edmiston
	James A. Edmiston
	President and Chief Executive Officer

Dated: August9, 2016	By:	/s/ Stephen C. Haynes
	Stephen C. Haynes
	Vice President - Finance, Chief Financial Officer and Treasurer

42

EX-31.1

EXHIBIT 31.1

I, James A. Edmiston, certify that:

1. I have reviewed this report on Form 10-Q of Harvest Natural Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 9, 2016

By:	/s/James A. Edmiston
	James A. Edmiston
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Stephen C. Haynes, certify that:

1. I have reviewed this report on Form 10-Q of Harvest Natural Resources, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:  August  9, 2016

By:	/s/ Stephen C. Haynes
	Stephen C. Haynes
	Vice President - Finance, Chief Financial Officer
	and Treasurer

EX-32.1

EXHIBIT 32.1

Accompanying Certificate

Pursuant to Rule 13a – 14(b) or Rule 15d – 14(b)

and 18 U.S.C Section 1350

Not Filed Pursuant to the Securities Exchange Act of 1934

The undersigned Chief Executive Officer of Harvest Natural Resources, Inc. (the “Company”) does hereby certify as follows:

This report on Form 10-Q of Harvest Natural Resources, Inc. for the period ended June  30, 2016 and filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August  9, 2016	By:	/s/James A. Edmiston
		James A. Edmiston
		President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Accompanying Certificate

Pursuant to Rule 13a – 14 (b) or Rule 15d – 14(b)

and 18 U.S.C Section 1350

Not Filed Pursuant to the Securities Exchange Act of 1934

The undersigned Chief Financial Officer of Harvest Natural Resources, Inc. (the “Company”) does hereby certify as follows:

This report on Form 10-Q of Harvest Natural Resources, Inc. for the period ended June 30, 2016 and filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:  August 9, 2016	By:	/s/ Stephen C. Haynes
		Stephen C. Haynes
		Vice President – Finance, Chief Financial Officer
		and Treasurer

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Aug. 04, 2016
Document And Entity Information [Abstract]
Entity Registrant Name	HARVEST NATURAL RESOURCES, INC.
Entity Filer Category	Accelerated Filer
Entity Central Index Key	0000845289
Amendment Flag	false
Document Type	10-Q
Document Fiscal Period Focus	Q2
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		51,393,479

XML

CONSOLIDATED CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
CURRENT ASSETS:
Cash and cash equivalents	$ 2,800	$ 7,761
Accounts receivable	264	2,461
Prepaid expenses and other	452	826
TOTAL CURRENT ASSETS	3,516	11,048
LONG-TERM NOTE RECEIVABLE – RELATED PARTY, net of reserve for $5.2 million at June 30, 2016
PROPERTY AND EQUIPMENT:
Oil and natural gas properties (successful efforts method)	30,924	31,006
Other administrative property, net	642	455
TOTAL PROPERTY AND EQUIPMENT, net	31,566	31,461
EMBEDDED DERIVATIVE ASSETS	7,144	5,010
LONG-TERM DEFERRED INCOME TAX ASSETS	85	120
OTHER ASSETS, net of allowance for $0.7 million (2016 and 2015)	123	142
TOTAL ASSETS	42,434	47,781
CURRENT LIABILITIES:
Accounts payable, trade and other	240	370
Accrued expenses	7,362	3,327
Accrued interest - related party	1,084	954
Other current liabilities	107	165
TOTAL CURRENT LIABILITIES	8,793	4,816
LONG-TERM DEBT DUE TO RELATED PARTY, net of discount	7,824	214
WARRANT DERIVATIVE LIABILITY WITH RELATED PARTY	16,417	5,503
OTHER LONG-TERM LIABILITIES		42
TOTAL LIABILITIES	33,034	10,575
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01 per share; authorized 5,000 shares; issued and outstanding, none
Common stock, par value $0.01 per share; shares authorized 150,000 (2016 and 2015); shares issued 57,987 (2016 and 2015); shares outstanding 51,415 (2016 and 2015)	580	580
Additional paid-in capital	303,603	302,273
Accumulated deficit	(226,772)	(199,778)
Treasury stock, at cost, 6,572 shares (2016 and 2015)	(66,316)	(66,316)
TOTAL HARVEST STOCKHOLDERS' EQUITY	11,095	36,759
NONCONTROLLING INTEREST OWNERS	(1,695)	447
TOTAL EQUITY	9,400	37,206
TOTAL LIABILITIES AND EQUITY	$ 42,434	$ 47,781

XML

CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2016	Dec. 31, 2015
ASSETS
LONG-TERM NOTE RECEIVABLE – RELATED PARTY, reserve	$ 5.2
OTHER ASSETS, allowance	$ 0.7	$ 0.7
STOCKHOLDERS' EQUITY:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	57,987,000	57,987,000
Common stock, shares outstanding	51,415,000	51,415,000
Treasury stock, at cost, shares	6,572,000	6,572,000

XML

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
EXPENSES:
Depreciation and amortization		$ 14	$ 27	$ 40	$ 56
Exploration expense		418	575	1,139	2,507
Impairment expense - oilfield inventories				128
Reserve for note receivable - related party				5,160
General and administrative		4,573	5,517	10,522	9,675
Total expense		5,005	6,119	16,989	12,238
LOSS FROM OPERATIONS		(5,005)	(6,119)	(16,989)	(12,238)
OTHER NON-OPERATING INCOME (EXPENSE):
Change in fair value of warrant derivative liability		(6,853)	2,418	(10,914)	2,418
Change in fair value of embedded derivative assets and liabilities		1,696	557	1,687	557
Interest expense		(1,373)	(614)	(2,469)	(851)
Loss on issuance of debt and warrant			(20,402)		(20,402)
Foreign currency transaction gains, net		38	77	192	80
Transaction costs related to sale of Harvest Holding		(1,551)		(1,551)
Total other non-operating income (expense)		(8,043)	(17,964)	(13,055)	(18,198)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(13,048)	(24,083)	(30,044)	(30,436)
INCOME TAX EXPENSE		8	1,604	16	1,220
LOSS FROM CONTINUING OPERATIONS		(13,056)	(25,687)	(30,060)	(31,656)
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST OWNERS		(158)	(262)	(3,066)	(614)
NET LOSS AND COMPREHENSIVE LOSS ATTRIBUTABLE TO HARVEST	[1],[2]	$ (12,898)	$ (25,425)	$ (26,994)	$ (31,042)
LOSS PER SHARE:
Basic loss per share	[2]	$ (0.25)	$ (0.60)	$ (0.53)	$ (0.73)
Diluted loss per share	[2]	$ (0.25)	$ (0.60)	$ (0.53)	$ (0.73)

[1] Net of net loss attributable to noncontrolling interest owners.

[2] Net of net loss attributable to noncontrolling interests.

XML

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (30,060)	$ (31,656)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	40	56
Impairment expense - oilfield inventories	128
Amortization of debt financing costs		283
Accretion of discount on debt	427	145
Reserve for note receivable - related party	5,160
Loss on debt issuance		20,402
Share-based compensation-related charges	1,914	1,491
Deferred income tax expense		1,200
Change in fair value of warrant liability	10,914	(2,418)
Change in fair value of embedded derivative assets and liabilities	(1,687)	(557)
Changes in operating assets and liabilities:
Accounts receivable	2,197	(152)
Prepaid expenses and other	374	(15)
Long-term deferred tax assets	35	(65)
Other assets	19	583
Accounts payable	(130)	508
Accrued expenses	3,419	(977)
Accrued interest	1,867	100
Other current liabilities	(58)	42
Other long-term liabilities	(1)	160
NET CASH USED IN OPERATING ACTIVITIES	(5,442)	(10,870)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of property and equipment, net	(283)	(353)
Note receivable - related party	(5,160)
NET CASH USED IN INVESTING ACTIVITIES	(5,443)	(353)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt repayment		(8,900)
Gross proceeds from issuance of debt and warrants	5,000	33,500
Contributions from noncontrolling interest owners	924	163
Financing costs		(1,245)
NET CASH PROVIDED BY FINANCING ACTIVITIES	5,924	23,518
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(4,961)	12,295
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	7,761	6,585
CASH AND CASH EQUIVALENTS AT END OF PERIOD	2,800	18,880
Supplemental Cash Flow Information:
Cash paid during the period for interest expense		470
Cash paid during the period for income taxes	8	4
Supplemental Schedule of Noncash Investing and Financing Activities:
Decrease in current liabilities related to additions of property and equipment	(10)	(99)
Increase in Stockholders' Equity from forgiveness of note payable and accrued interest		$ 6,157
Increase in long-term debt due to the capitalization of accrued interest	$ 1,736

XML

Organization

6 Months Ended

Jun. 30, 2016

Organization [Abstract]

Organization

Note 1 – Organization

Organization

Harvest Natural Resources, Inc. (“Harvest” or the “Company”) is a petroleum exploration and production company incorporated under Delaware law in 1988.

We acquired and developed significant interests in the Bolivarian Republic of Venezuela (“Venezuela”). Our Venezuelan interests are owned through Harvest-Vinccler Dutch Holding B.V., a Dutch private company with limited liability (“Harvest Holding”). Our 51 percent ownership of Harvest Holding is through HNR Energia B.V. (“HNR Energia”) in which we have a direct controlling interest. We have partners, Oil & Gas Technology Consultants (Netherlands) Coöperatie U.A., (“Vinccler”, a controlled affiliate of Venezolana de Inversiones y Construcciones Clerico, C.A.), which has a 20 percent noncontrolling interest in Harvest Holding, and  Petroandina Resources Corporation N.V. (“Petroandina”, a wholly owned subsidiary of Pluspetrol Resources Corporation B.V. (“Pluspetrol”)), which has a 29 percent noncontrolling interest in Harvest Holdings.  We do not have business relationships with Vinccler or Pluspetrol outside of Venezuela.

Harvest Holding owns 100 percent of HNR Finance B.V. (“HNR Finance”), and HNR Finance owns a 40 percent interest in Petrodelta, S.A. (“Petrodelta”). Petrodelta is our cost method investment in eastern Venezuela responsible for the exploration, development, production, gathering, transportation and storage of hydrocarbons in six oil fields.  Petrodelta is governed by its own charter and bylaws and the shareholders intend that Petrodelta be self-funding and rely on internally-generated cash flows. 

Corporación Venezolana del Petroleo S.A. (“CVP”) and PDVSA Social S.A. own the remaining 56 percent and 4 percent, respectively, of Petrodelta. Petroleos de Venezuela S.A. (“PDVSA”) owns 100 percent of CVP and PDVSA Social S.A. Through our indirect 51 percent in Harvest Holding, we indirectly own a net 20.4 percent interest in Petrodelta.

In addition to our interests in Venezuela, we hold exploration acreage offshore of the Republic of Gabon (“Gabon”) through the Dussafu Marin Permit (“Dussafu PSC”).  See Note 7 – Gabon.

Interim Reporting

In our opinion, the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position as of June 30, 2016, results of operations for the three and six months ended June 30, 2016 and 2015, and the cash flows for the six months ended June 30, 2016 and 2015.  TheDecember 31, 2015 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by United States of America generally acceptedaccounting principles (“U.S. GAAP”).  The unaudited consolidated condensed financial statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by U.S. GAAP. The consolidated condensed financial statements included in this report should be read with our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, which include certain definitions and a summary of significant accounting policies. The results of operations for any interim period are not necessarily indicative of the results of operations for the entire year.

Securities Purchase Agreement

On June 19, 2015, the Company and certain of its domestic subsidiaries entered into a securities purchase agreement (the “Securities Purchase Agreement”) with CT Energy Holding SRL (“CT Energy”), a private investment firm organized as a Barbados Society with Restricted Liability, under which CT Energy purchased certain securities of the Company and acquired certain governance rights.  Harvest immediately received gross proceeds of $32.2 million from the sale of the securities, as described below.   Key terms of the transaction include:

· CT Energy acquired a $25.2 million, five year, 15.0% non-convertible senior secured promissory note (the “15% Note”). Interest is payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2015. 

· CT Energy acquired a $7.0 million, five year, 9.0% convertible senior secured note (the “9% Note”). The 9% Note and associated accrued interest of $0.1 million was converted into 8,667,597 shares of Harvest common stock at a conversion price of $0.82 per share on September 15, 2015.  Immediately after the conversion, CT Energy owned approximately 16.8% of Harvest’s common stock.

· CT Energy also acquired a warrant to purchase up to 34,070,820 shares of Harvest's common stock at an initial exercise price of $1.25 per share (the “CT Warrant”). The CT Warrant would become exercisable only after the 30-day volume weighted average price of Harvest's common stock equals or exceeds $2.50 per share (“Stock Appreciation Date”).  The CT Warrant is cash-exercisable, but CT Energy may surrender the 15% Note to pay for a portion of the aggregate exercise price. 

· CT Energy acquired a five-year 15.0% non-convertible senior secured note (the “Additional Draw Note”), under which CT Energy may elect to provide $2.0 million of additional funds to the Company per month for up to six months following the one-year anniversary of the closing date of the transaction (up to $12.0 million in aggregate).  For funds loaned under the Additional Draw Note, interest will be compounded quarterly at a rate of 15.0% per annum and will be payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2016.  See Share Purchase Agreement – Additional Funding for further information.

· CT Energy was granted certain governance rights in the transaction, including the right to appoint specified directors. 

· CT Energia Holding Ltd. (“CT Energia”), a Malta corporation and the Company, entered into a Management Agreement (the “Management Agreement”), under which CT Energia and its representatives will provide management services with respect to the operations of the Company’s business as it relates to Petrodelta and Venezuela generally.

Share Purchase Agreement

On June 29, 2016, the Company, and its wholly owned subsidiary, HNR Energia, entered into a share purchase agreement (the “Share Purchase Agreement”) with CT Energy, pursuant to which HNR Energia agreed to sell to CT Energy HNR Energia’s 51 percent interest in Harvest Holding.

At the closing of the Transaction (the “Closing”), CT Energy or an affiliate will pay consideration consisting of:

· $80.0 million in cash, subject to adjustment as described below under “Adjustments to Cash Consideration”;

· an 11% non-convertible senior promissory note payable to HNR Energia six months from the Closing in the principal amount of $12.0 million, which will be guaranteed by the controlling equityholder of CT Energy;

· the return of 8,667,597 shares  to Treasury of the Company’s common stock owned by CT Energy (approximately 16.8% of all outstanding shares);

· the cancellation of $30.0 million in principal under the 15% Note; and

· the cancellation of the CT Warrant.

Conditions to Closing

Consummation of the sale of our Venezuelan interests is subject to the following conditions, in addition to customary closing conditions:

· the approval of the sale of our Venezuelan interests by the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock, as well as by the affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock that are not owned, directly or indirectly, by CT Energy or its affiliates (the “Requisite Stockholder Approval”);

· the approval by the Ministerio del Poder Popular de Petróleo y Minería of the Bolivarian Republic of Venezuela of the change in control, resulting from the sale of Venezuelan interests (the “Venezuela Approval”); and

· the waiver by Petroandina of its rights under the Shareholders’ Agreement with HNR Energia, dated as of December 16, 2013 (the “Shareholders’ Agreement”), with respect to the sale of our Venezuelan interests, including any obligation of CT Energy to become a party to the Shareholders’ Agreement, or the exercise by Petroandina of its change of control put right to sell its 29% interest in Harvest Holding to CT Energy at the same time as HNR Energia sells its interests.

Adjustments to Cash Consideration

At the Closing, the $80.0 million in cash consideration will be (i) reduced by the amount by which the outstanding principal and accrued interest under the 15% Note exceeds $30.0 million (and the entire 15% Note will be cancelled); (ii) reduced by the amount of outstanding principal and accrued interest under the Additional Draw Note (as described below under “Additional Funding”) (and the Additional Draw Note will be cancelled); and (iii) increased by the aggregate amount of cash amounts contributed by the Company or HNR Energia to, or accounts payable and other expenses accrued by the Company or HNR Energia for the benefit of, Harvest Holding and its subsidiaries in respect of expenditures included in Harvest Holdings’ budget.

Letter of Credit

Upon the execution of the Share Purchase Agreement, CT Energy provided to HNR Energia a $15 million irrevocable standby letter of credit issued by JP Morgan Chase Bank (the “Letter of Credit”).  If the Closing occurs, the Letter of Credit will be returned undrawn to CT Energy and JP Morgan Chase Bank. HNR Energia is entitled to draw on the Letter of Credit and keep the $15 million proceeds as liquidated damages if (1) the Share Purchase Agreement is terminated because of a material uncured breach by CT Energy or (2) the Share Purchase Agreement is terminated when all conditions to closing have been satisfied (other than the Venezuela Approval and other conditions that can only be satisfied by CT Energy at the Closing), including the Requisite Stockholder Approval. If the Share Purchase Agreement is terminated for any other reason, the Letter of Credit must be returned undrawn to CT Energy and JP Morgan Chase Bank.

No Shop and Termination Matters

Subject to certain limited exceptions, the Share Purchase Agreement provides that the Company, its subsidiaries, and its and their respective representatives are prohibited from, among other things, initiating, soliciting or knowingly encouraging or facilitating the making of any alternative acquisition proposals from third parties or providing non-public information to or participating in any discussions or negotiations regarding an alternative acquisition proposal with any person that has made an alternative acquisition proposal, subject to customary exceptions prior to the receipt of the Requisite Stockholder Approval relating to proposals that are reasonably likely to lead to a “Superior Proposal” (as defined in the Share Purchase Agreement).

The Share Purchase Agreement contains certain termination rights, including the right of HNR Energia to terminate the Share Purchase Agreement in order for the Company to accept a Superior Proposal (so long as the Company complies with certain notice and other requirements under the Share Purchase Agreement), and provides that, upon termination of the Share Purchase Agreement by HNR Energia or CT Energy in certain circumstances, HNR Energia will be required to pay CT Energy a termination fee of $4.6 million. Such specified circumstances include, among others, (i) termination by HNR Energia in order for the Company to enter into an alternative acquisition agreement with respect to a Superior Proposal, in which case HNR Energia will also be required to pay the outstanding principal amount of the 15% Note and Additional Draw Note plus accrued and unpaid interest and any make-whole premium, (ii) termination by CT Energy after a change of recommendation by the Company’s board of directors and (iii) termination by CT Energy after a breach by the Company or HNR Energia of the Share Purchase Agreement that gives rise to the failure of the closing conditions and is either not capable of being cured by the outside date specified in the Share Purchase Agreement or is not cured within 30 days of notice of such breach. CT Energy may also terminate the Share Purchase Agreement if the Requisite Stockholder Approval is not obtained by September 15, 2016. Additionally, either CT Energy or HNR Energia may terminate the Share Purchase Agreement if all conditions precedent to the Closing are not satisfied within 30 days after receipt of the Requisite Stockholder Approval; provided, however, that a party that is in material breach of its obligations under the Share Purchase Agreement may not terminate the Share Purchase Agreement if the material breach is the principal cause of a condition to Closing not being satisfied.

Additional Funding

To fund Harvest’s transaction expenses and operations until the Closing, CT Energy has agreed to lend Harvest $2.0 million per month for up to five months at 15% interest beginning on July 19, 2016, until the earlier of the Closing or the termination of the Share Purchase Agreement. These loans will be made under the Additional Draw Note, which is discussed above under “Securities Purchase Agreement.” As of August 8, 2016, the outstanding principal under the Additional Draw Note is $4.0 million, consisting of $2.0million loans by CT Energy on each on June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016.  As discussed above, the $80 million cash consideration will be reduced by the amount outstanding under the Additional Draw Note at Closing, including both outstanding principal and accrued interest.

While CT Energy is making the monthly $2.0 million loans under the Additional Draw Note, as CT Energy currently has committed to do under the Share Purchase Agreement, the original claim date of June 19, 2016, (the “Claim Date”) under the Securities Purchase Agreement will be extended on a month-by-month basis.  Upon the expiration of the Claim Date, CT Energy’s governance rights under the Securities Purchase Agreement would terminate (but only if the Stock Appreciation Date had failed to occur before the Claim Date).

Other Material Terms

The Share Purchase Agreement contains customary representations, warranties and covenants. These representations, warranties and covenants were made only for purposes of the Share Purchase Agreement and as of specific dates, are solely for the benefit of the parties to the Share Purchase Agreement, may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Share Purchase Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the parties that differ from those applicable to investors. Investors should not rely on the representations, warranties or covenants or any description thereof as characterizations of the actual state of facts or condition of the Company, CT Energy, or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Share Purchase Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company, CT Energy or their subsidiaries or affiliates.

Other material terms of the Share Purchase Agreement are as follows.

· The Company agreed to guarantee HNR Energia’s performance of all obligations arising under the Share Purchase Agreement.

· From the date of the Share Purchase Agreement and continuing in effect after the Closing, the Company, on behalf of itself and its subsidiaries, waived all rights to exercise any legal action against Petrodelta, any affiliate of Petrodelta or any governmental authority.

· At the Closing, the Securities Purchase Agreement and certain agreements related to the Securities Purchase Agreement, including the Management Agreement will terminate. Additionally, all liens securing Company debt formerly owed to CT Energy will be released at the Closing. After the Closing, the Company’s primary assets will be cash from the proceeds of the transaction and the Company’s oil and gas interests in the Republic of Gabon.

Long-Term Receivable – CT Energia

On January 4, 2016, HNR Finance provided a loan to CT Energia in the amount of $5.2 million under an 11.0% promissory note due 2019 (the “CT Energia Note”). The purpose of the loan is to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta that is 40% owned by HNR Finance and through which Harvest’s Venezuelan oil and natural gas interests are held. The loans to Petrodelta are to assist Petrodelta in satisfying its working capital needs and discharging its obligations. Interest on the CT Energia Note is due and payable on the first of each January and July, commencing July 1, 2016. The full amount outstanding, including any unpaid accrued interest, is due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan is the payments of principal and interest from loans that CT Energia has made to Petrodelta. If and when CT Energia receives payments of principal or interest from loans it has made to Petrodelta, then those proceeds must be used to pay unpaid interest and principal under the CT Energia Note. All payments made by CT Energia to HNR Finance under the CT Energia Note must be made in U.S. Dollars.   No interest payments have been made under the CT Energy note as of August 8, 2016.

The source of funds for HNR Finance’s $5.2 million loan to CT Energia was a capital contribution from Harvest Holding, which, in return, received the same aggregate amount of capital contributions from its shareholders, pro rata according to their equity interests in Harvest Holding. Of that aggregate amount of capital contributions, HNR Energia contributed $2.6 million, which was a capital contribution from Harvest.    The Management Agreement the Company entered into with CT Energia also makes CT Energia a related party.  During the three months ended March 31, 2016, we recorded a $5.2 million allowance to fully reserve the CT Energia Note due to concerns related to the continued deteriorating economic conditions in Venezuela and our assessment relating to the probability that the CT Energia Note will be collected.  As of June 30, 2016 the CT Energia Note remains fully reserved and we are not accruing interest on this note receivable.

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Liquidity

6 Months Ended

Jun. 30, 2016

Liquidity [Abstract]

Liquidity

Note 2 – Liquidity

We expect that for 2016 we will not generate revenue, will continue to generate losses from operations, and our cash flows will not be sufficient to cover our operating expenses. Therefore, expected continued losses from operations, capital needs and uses of cash will be funded through debt or equity financings, farm-downs, anticipated CT Energy Transaction, delay of the discretionary portion of our capital spending to future periods or operating cost reductions.  Our ability to continue as a going concern depends on our ability to complete the transaction under the Share Purchase Agreement and the success of our planned exploration and development activities in Gabon.  There can be no guarantee of future capital acquisition, fundraising or exploration success or that we will realize the value of our exploration and exploitation acreage and suspended wells.  Our current cash position and our inability to access additional capital may limit our available opportunities or not provide sufficient cash for operations.

Our primary ongoing sources of cash are issuances of debt and the sale or farm-down of oil and natural gas properties in Gabon. Our primary use of cash has been to fund oil and natural gas exploration projects, principal payments on debt, interest payments, and general and administrative costs. We require capital principally to fund the exploration and development of new oil and natural gas properties. We have various contractual commitments pertaining to exploration, development and production activities.  See Note 10 – Commitments and Contingencies for our contractual commitments.

In January, April and July 2016, due to our liquidity position, the Company amended the 15% Note to increase the principal amount of the note equal to the amount of the accrued interest, less withholding tax that was due to CT Energy.  On May 3, 2016, the Company increased the principal amount of the 15% Note by $3.0 million bringing the principal amount outstanding under the 15% Note to $30.0 million as of June 30, 2016.  As of June 30, 2016 we capitalized interest payments totaling $1.7 million.  There can be no assurance that we will be able to amend our loan agreement with CT Energy to increase the principal amount of the 15% Note if our liquidity position does not allow us to make future interest payments when due.

As discussed above in Note 1 – Share Purchase Agreement – Additional Funding, the outstanding principal under the Additional Draw Note is $4.0 million, consisting of loans of $2.0million by CT Energy on each of June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016 to fund Harvest’s transaction expenses and operations until the Closing.

We are currently assessing alternatives for our Gabon asset and we intend to continue our consideration of a possible sale or farm-down of our Gabon asset if we are able to negotiate a sale or sales in transactions that our Board of Directors believes are in the best interests of the Company and its stockholders.   Given that we do not currently have any operating cash inflows, we may also decide to access additional capital through equity or debt sales; however, there can be no assurance that such financing will be available to the Company or on terms that are acceptable to the Company.

On December 2, 2015, the Company received notification from the New York Stock Exchange (“NYSE”) that the Company was not in compliance with the NYSE's continued listing standards, which require a minimum average closing price of $1.00 per share over 30 consecutive trading days.  Under the NYSE's rules, Harvest has a period of six months from the date of the NYSE notice to bring its share price and 30 trading-day average share price back above $1.00.  During this period, the Company’s common stock will continue to be traded on the NYSE under the symbol “HNR”, subject to the Company’s compliance with other NYSE continued listing requirements, but will be assigned the notation .BC after the listing symbol to signify that the Company is not currently in compliance with the NYSE’s continued listing standards.  As required by the NYSE, in order to maintain its listing, Harvest notified the NYSE that it intends to cure the price deficiency.

On April 25, 2016, the Company received a notice from the NYSE stating that the Company is not in compliance with a second NYSE continued listing requirement, which provides that a company is not in compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders’ equity is less than $50 million.  As required by NYSE rules, the Company notified the NYSE that, within 45 days of receipt of the notice, the Company will submit a business plan that demonstrates its ability to regain compliance within 18 months. The NYSE accepted our plan on July 14, 2016, and we are now subject to quarterly monitoring for compliance with the plan. If the Company fails to comply with the business plan the NYSE may commence suspension and delisting procedures.

Failure to generate sufficient cash flow, raise additional capital through debt or equity financings, complete the proposed transaction under the Share Purchase Agreement, farm-downs, or reduce operating costs could have a material adverse effect on our ability to meet our short- and long-term liquidity needs and achieve our intended long-term business objectives.

The above circumstances raise substantial doubt about our ability to continue as a going concern.  While we believe the issuance of additional equity securities, short- or long-term debt financing, completion of the proposed transaction under the Share Purchase Agreement, farm-downs, the delay of the discretionary portion of our capital spending to future periods or operating cost reductions could be put into place which would not jeopardize our operations and future growth plans, there can be no assurance that such events will be successful.

Our financial statements have been prepared under the assumption that we will continue as a going concern, which contemplates that we will continue in operation for the foreseeable future and will be able to realize assets and settle liabilities and commitments in the normal course of business.  The accompanying consolidated condensed financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that could result should we be unable to continue as a going concern.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated condensed financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. All intercompany profits, transactions and balances have been eliminated. Third-party interests in our majority-owned subsidiaries are presented as noncontrolling interests owners.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.  These reclassifications did not affect our consolidated condensed financial results.

Note Receivable

A loan is considered impaired if it is probable, based on current information and events, that the Company will be unable to collect all amounts due according to the contractual terms of the loan. Loans are reviewed for impairment and include loans that are past due, non-performing or in bankruptcy. Recognition of interest income is suspended and the loan is placed on non-accrual status when management determines that collection of future interest income is not probable. Accrual is resumed, and previously suspended interest income is recognized, when the loan becomes contractually current and/or collection doubts are removed. Cash receipts on impaired loans are recorded first against the receivable and then to any unrecognized interest income.

Investment in Affiliate

We are accounting for our investment in Petrodelta under Accounting Standards Codification (“ASC”) 325 – Investments – Other (the “cost method”).  Under the cost method we will not recognize any equity in earnings from our investment in Petrodelta in our results of operations, but will recognize any cash dividends in the period they are received.  

As of December 31, 2015, we fully impaired the carrying value of our investment in Petrodelta.  See Note 5 – Investment in Affiliate for further information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Other important significant estimates are those included in the valuation of our assets and liabilities that are recorded at fair value on a recurring and non-recurring basis.  Actual results could differ from those estimates.

Oil and Natural Gas Properties

The major components of property and equipment are as follows: 

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)
Unproved property costs - Dussafu PSC	$	28,045	$	28,000
Oilfield inventories		2,878		3,006
Other administrative property		3,176		2,937
Total property and equipment		34,099		33,943
Accumulated depreciation		(2,533)		(2,482)
Total property and equipment, net	$	31,566	$	31,461

Other Administrative Property

Furniture, fixtures and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which range from three to five years. Leasehold improvements are recorded at cost and amortized using the straight-line method over the life of the applicable lease. For the three and six months ended June 30, 2016, depreciation expense was $14 thousand and $40 thousand, respectively.  For the three and six months ended June 30, 2015, depreciation expense was $27 thousand and $56 thousand, respectively.

Other Assets

Other assets at June 30, 2016 and December 31, 2015 include deposits and retainers.  During 2015 we fully reserved the $1.1 million blocked payment related to our drilling operations in Gabon.  The payment was blocked in accordance with the U.S. sanctions against Libya as set forth in Executive Order 13566 of February 25, 2011, and administered by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”).  See Note 10 – Commitments and Contingencies.   At December 31, 2015, we recorded an allowance for doubtful accounts of $0.7 million and the remaining balance of the blocked payment was reclassified to a receivable from our joint venture partners for $0.4 million. 

Capitalized Interest

We capitalize interest costs for qualifying oil and natural gas properties. The capitalization period begins when expenditures are incurred on qualified properties, activities begin which are necessary to prepare the property for production and interest costs have been incurred. The capitalization period continues as long as these events occur.  The average additions for the period are used in the interest capitalization calculation. During the three and six months ended June 30, 2016 and 2015, we did not capitalize interest costs due to insufficient on-going activity related to our oil and natural gas activities.

Fair Value Measurements

We measure and disclose our fair values in accordance with the provisions of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:

· Level 1 – Inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities.

· Level 2 – Inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly.

· Level 3 – Inputs to the valuation techniques that are unobservable for the assets or liabilities.

Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, accounts receivable, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), debt, embedded derivatives and warrant derivative liability. We maintain cash and cash equivalents in bank deposit accounts with commercial banks, which at times may exceed the federally insured limits. We have not experienced any losses from such investments. Concentrations of credit risk with respect to accounts receivable are limited due to the nature of our receivables. In the normal course of business, collateral is not required for financial instruments with credit risk.  The estimated fair value of cash and cash equivalents and accounts receivable, prepaid costs, accounts payable, accrued expenses and other current liabilities approximate their carrying value due to their short-term nature (Level 1).  The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value as of June 30, 2016 and December 31, 2015.  During the year ended December 31, 2015, we impaired the carrying value of our Dussafu project in Gabon by $23.2 million and our investment in affiliate by $164.7 million.  See Note 5 – Investment in Affiliate and Note 7 – Gabon for more information.

	As of June 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Recurring
Assets:
Embedded derivative asset - 15% Note	$	—	$	—	$	6,697	$	6,697
Embedded derivative asset - Additional Draw Note		—		—		447		447
	$	—	$	—	$	7,144	$	7,144
Liabilities:
SARs liability	$	—	$	93	$	241	$	334
RSUs liability		—		520		—		520
Warrant derivative liability		—		—		16,417		16,417
	$	—	$	613	$	16,658	$	17,271

	As of December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Non recurring
Assets:
Dussafu PSC	$	—	$	—	$	28,000	$	28,000
	$	—	$	—	$	28,000	$	28,000
Recurring
Assets:
Embedded derivative asset	$	—	$	—	$	5,010	$	5,010
	$	—	$	—	$	5,010	$	5,010
Liabilities:
SARs liability	$	—	$	46	$	50	$	96
RSUs liability		—		174		—		174
Warrant derivative liability		—		—		5,503		5,503
	$	—	$	220	$	5,553	$	5,773

As of June 30, 2016, the fair value of our liability awards included $0.3 million for our SARs and $0.5 million for the RSUs both of which were recorded in accrued expenses.   As of December 31, 2015, the fair value of our liability awards included $0.1 million for our SARs which were recorded in accrued expenses and $0.2 million for our RSUs which were recorded in accrued expenses and other long-term liabilities.

Derivative Financial Instruments

As required by ASC 820, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.  See Note 9 – Warrant Derivative Liability for a description and discussion of our warrant derivative liability as well as a description of the valuation models and inputs used to calculate the fair value.  See Note 8 – Debt and Financing for a description and discussion of our embedded derivatives related to our 15% Note as well as a description of the valuation models and inputs used to calculate the fair value.  All of our embedded derivatives and warrants are classified as Level 3 within the fair value hierarchy. 

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following table provides a reconciliation of financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial assets -  embedded derivative asset:
Beginning balance	$	5,001	$	—	$	5,010	$	—
Additions		447		2,504		447		2,504
Change in fair value		1,696		123		1,687		123
Ending balance	$	7,144	$	2,627	$	7,144	$	2,627

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  embedded derivative liability:
Beginning balance	$	—	$	—	$	—	$	—
Additions - fair value at issuance		—		13,449		—		13,449
Change in fair value		—		(434)		—		(434)
Ending balance	$	—	$	13,015	$	—	$	13,015

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  warrant derivative liability:
Beginning balance	$	9,564	$	—	$	5,503	$	—
Additions		—		40,013		—		40,013
Change in fair value		6,853		(2,418)		10,914		(2,418)
Ending balance	$	16,417	$	37,595	$	16,417	$	37,595

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  stock appreciation rights
Beginning balance	$	120	$	—	$	50	$	—
Change in fair value		121		—		191		—
Ending balance	$	241	$	—	$	241	$	—

During three and six months ended June 30, 2016 and 2015, no transfers were made between Level 1, Level 2 and Level 3 liabilities or investments.

Share-Based Compensation

We use the fair value based method of accounting for share-based compensation. We utilized the Black-Scholes option pricing model to measure the fair value of stock options and SARs on their grant dates in years prior to 2015. Restricted stock and RSUs were measured at their fair values.  During 2015, we issued options, SARs and RSUs with an additional market condition.  To fair value these awards, we utilized a Monte Carlo simulation.

The following table is a summary of compensation expense recorded in general and administrative expense in our consolidated condensed statements of operations and comprehensive loss by type of awards:

	Six Months Ended June 30,
Employee Stock-Based Compensation	2016		2015
	(in thousands)
Equity based awards:
Stock options	$	1,113	$	920
Restricted stock		68		68
RSUs		149		—
Total expense related to equity based awards		1,330		988
Liability based awards:
SARs		238		277
RSUs		346		226
Total expense related to liability based awards		584		503
Total compensation expense	$	1,914	$	1,491

The assumptions summarized in the following table were used to calculate the fair value of the SARs classified as Level 3 instruments that were outstanding as of the balance sheet date:

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Exercise price	Level 1 input	$	1.13
Threshold price	Level 1 input	$	2.50
Suboptimal exercise factor	Level 3 input		2.5
Term (years)	Level 1 input		4.06
Volatility	Level 2 input		110.0	%
Risk-free rate	Level 1 input		0.87	%
Dividend yield	Level 2 input		0.0	%

Income Taxes

Deferred income taxes reflect the net tax effects, calculated at currently enacted rates, of (a) future deductible/taxable amounts attributable to events that have been recognized on a cumulative basis in the financial statements or income tax returns, and (b) operating loss and tax credit carryforwards. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized.

We classify interest related to income tax liabilities and penalties as applicable, as interest expense.  We recorded no penalties during the three and six months ended June 30, 2016 and 2015.

Since December 2013, we have provided deferred income taxes on undistributed earnings of our foreign subsidiaries where we are not able to assert that such earnings were permanently reinvested, or otherwise could be repatriated in a tax free manner, as part of our ongoing business.  As of December 31, 2015 and through the second quarter of 2016, the deferred tax liability provided on such earnings was zero due to the impairment of the underlying book investment in Petrodelta.

The 15% Note was issued, for income tax purposes, with original issue discount (“OID”).  OID generally is deductible for income tax purposes.  However, if the debt instrument constitutes an “applicable high-yield discount obligation” (“AHYDO”) within the meaning of IRC Section 163(i)(1), then a portion of the OID likely would be non-deductible pursuant to IRC Section 163(e)(5).  Our analysis of the 15% Note is that the note may be an AHYDO; consequently, a portion or all of the OID likely may be non-deductible for income tax purposes.

The Internal Revenue Service (“IRS”) audited the Company’s 2013 and 2014 tax years. The audit commenced in April 2016 and the IRS informed us that it will issue a no charge report.

Noncontrolling Interest Owners

Changes in noncontrolling interest owners were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	(1,920)	$	78,902	$	447	$	79,152
Contributions by noncontrolling interest owners		383		61		924		163
Net loss attributable to noncontrolling interest owners		(158)		(262)		(3,066)		(614)
Balance at end of period	$	(1,695)	$	78,701	$	(1,695)	$	78,701

New Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases”.  It is expected to be effective for periods beginning after December 15, 2018 for public entities.  Early application is permitted.  Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less.  All other leases will fall into one of two categories: (1) Financing leases, similar to capital leases, will require the recognition of an asset and liability, measured at the present value of the lease payments.  Interest on the liability will be recognized separately from amortization of the asset.  Principal repayments will be classified as financing outflows and payments of interest as operating outflows on the statement of cash flows.  (2) Operating leases will also require the recognition of an asset and liability measured at the present value of the lease payments.  A single lease cost, consisting of interest on the obligation and amortization of the asset, calculated such that the amortization of the asset will increase as the interest amount decreases resulting in a straight-line recognition of lease expense.  All cash outflows will be classified as operating on the statement of cash flows.  We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging (Topic 815: Contingent Put and Call Options in Debt Instruments)”.  This amendment addresses how an entity should assess whether contingent call (put) options that can accelerate the payment of debt instruments that are clearly and closely related to the debt hosts.  This assessment is necessary to determine if the option(s) must be separately accounted for as a derivative.  The ASU clarifies that an entity is required to assess the embedded call (put) options solely in accordance with the specific four-step decision sequence. This means entities  are not also required to assess whether the contingency for exercising the option(s) is indexed to interest rates or credit risk. For example, when evaluating debt instruments puttable upon a change in control, the event triggering the change in control is not relevant to the assessment.  Only the resulting settlement of debt is subject to the four-step decision sequence.  The amendment is effective for public entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.  Early adoption is permitted.  However, if an entity early adopts the amendment in an interim period, any adjustments should be reflected as of the beginning of that fiscal year.  We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.   

In March 2016, the FASB issued ASU No. 2016-07, “Investments — Equity Method and Joint Ventures (Topic 323)”. This amendment simplifies the accounting for equity method of investments, the amendment in the update eliminates the requirement in Topic 323 that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendment requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendment in this update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendment should be applied prospectively upon the effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted.  We are currently evaluating the impact of this guidance.

In March 2016, the FASB issued ASU No 2016-09, “Compensation — Stock Compensation (Topic 718)”.  It introduces targeted amendments intended to simplify the accounting for stock compensation.  Specifically the ASU requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement.  The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur.  An entity also should recognize excess tax benefits, and assesses the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period.  That is, off balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption.  Entities will no longer need to maintain and track an Additional Paid In Capital pool.  The ASU also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows.  The amendment is effective for public entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  Early adoption is permitted.  We are currently evaluating the impact of this guidance. 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The new guidance is related to the calculation of credit losses on financial instruments. All financial instruments not accounted for at fair value will be impacted, including our trade and partner receivables. Allowances are to be measured using a current expected credit loss model as of the reporting date which is based on historical experience, current conditions and reasonable and supportable forecasts. This is significantly different from the current model which increases the allowance when losses are probable. This change is effective for all public companies for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years and will be applied with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the provisions of this guidance and are assessing its potential impact on our financial position, results of operations, cash flows and related disclosures.

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Earnings Per Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Note 4 – Earnings Per Share

Basic earnings per common share (“EPS”) are computed by dividing loss from continuing operations available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. 

		Three Months Ended June 30,			Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)				(in thousands)
Loss from continuing operations(a)	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)
Net loss attributable to Harvest	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)
Weighted average common shares outstanding		51,415		42,663		51,415		42,663
Weighted average common shares, diluted		51,415		42,663		51,415		42,663
Loss per share:
Basic loss per share(a)	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)
Diluted loss per share(a)	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)

a) Net of net loss attributable to noncontrolling interests.

During the three months ended June 30, 2016 per share calculations above excluded6.7 million options and 34.1 million warrants because we had a loss from continuing operations. During the three months ended June 30, 2015 per share calculations above excluded3.7 million options and 36.9 million warrants because we had a loss from continuing operations.

During the six months ended June 30, 2016 per share calculations above excluded6.9 million options and 34.1 million warrants because we had a loss from continuing operations. During six months ended June 30, 2015 per share calculations above excluded4.0 million options and 36.9 million warrants because we had a loss from continuing operations.

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Investment in Affiliate

6 Months Ended

Jun. 30, 2016

Investment in Affiliate [Abstract]

Investment in Affiliate

Note 5 – Investment in Affiliate

Venezuela – Petrodelta

Our 40 percent investment in Petrodelta is owned through our subsidiary, Harvest Holding.   We  continue to account for our investment in Petrodelta under the cost method as we do not exercise significant influence over the operations of Petrodelta. 

Under the cost method we will not recognize any equity in earnings from our investment in Petrodelta in our results of operations, but will recognize any cash dividends as income in the period they are received.  

The carrying value of our investment in Petrodelta at June 30, 2016 and December 31, 2015 was nil.

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Venezuela - Other

6 Months Ended

Jun. 30, 2016

Venezuela - Other [Abstract]

Venezuela - Other

Note 6 – Venezuela – Other

Harvest Vinccler, S.C.A, a wholly owned subsidiary of Harvest Holding (“Harvest Vinccler”) currently assists us in the oversight of our investment in Petrodelta and in negotiations with PDVSA. Harvest Vinccler’s functional and reporting currency is the United States Dollar (“USD”). They do not have currency exchange risk other than the official prevailing exchange rate that applies to their operating costs denominated in Venezuelan Bolivars (“Bolivars”).

On February 10, 2015, the Ministry of Economy, Finance, and Public Banking, and the Central Bank of Venezuela (BCV) published in the Extraordinary Official Gazette No.6.171 Exchange Agreement No.33 two Official Notices.  The first notice stated that the former auction process, SICAD II, would no longer be permitted.  The second notice established a new exchange rate called the Foreign Exchange Marginal System (“SIMADI”).  The SIMADI’s marginal system was available in limited situations for individuals and companies to purchase and sell foreign currency via banks and exchange houses.  The SIMADI marginal system had been the only exchange mechanism available to Harvest Vinccler. We successfully participated in SIMADI auctions during the three and six months ended June 30, 2015.  Harvest Vinccler exchanged $0.08 million for both periods, and received 199.80 Bolivars per USD. 

On March 9, 2016, the Venezuelangovernment announced a new exchange agreement No. 35 (the “Exchange Agreement No. 35”).  Exchange Agreement No. 35 was published in Venezuela’s Official Gazette No. 40865 dated March 9, 2016, and became effective on March 10, 2016.  Exchange Agreement No. 35 will have a dual exchange rate for a controlled rate (named DIPRO) fixed at DIPRO 10 Bolivars/USD for priority goods and services and a complementary rate (named DICOM) starting at 206.92 Bolivars per USD for travel and other non-essential goods.  During the three and six months ended June 30, 2016, Harvest Vinccler exchanged approximately $0.1 million and $0.1 million, respectively, and received 486.84 Bolivars and 397.74 Bolivars per USD, respectively. 

The monetary assets that are exposed to exchange rate fluctuations are cash, accounts receivable, prepaid expenses and other current assets. The monetary liabilities that are exposed to exchange rate fluctuations are accounts payable, accruals, current and deferred income tax and other tax obligations and other current liabilities. All monetary assets and liabilities incurred at the DIPRO exchange rate are settled at the 10 Bolivar/USD exchange rate. At June 30, 2016, the balances in Harvest Vinccler’s Bolivar denominated monetary assets and liabilities accounts that are exposed to exchange rate changes are 18.1 million Bolivars ($0.04 million)  and 31.5 million Bolivars ($0.06 million), respectively.

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Gabon

6 Months Ended

Jun. 30, 2016

Gabon [Abstract]

Gabon

Note 7 – Gabon

We are the operator of the Dussafu PSC with a 66.667 percent ownership interest. Located offshore Gabon, adjacent to the border with the Republic of Congo, the Dussafu PSC covers an area of 680,000 acres with water depths up to 1,650 feet.

The Dussafu PSC partners and the Republic of Gabon, represented by the Ministry of Mines, Energy, Petroleum and Hydraulic Resources, entered into the third exploration phase of the Dussafu PSC with an effective date of May 28, 2012. The third exploration phase expired May 27, 2016.    Expiration of the exploration phase has no effect on the discovered fields under the Exclusive Exploitation Authorization (“EEA”) as discussed below.

On March 26, 2014, the joint venture partners approved a resolution that the discovered fields are commercial to exploit.  On June 4, 2014, a Declaration of Commerciality (“DOC”) was signed with Gabon pertaining to four discoveries on the Dussafu Project offshore Gabon.  Furthermore, on July 17, 2014, the Direction Generale Des Hydrocarbures (“DGH”) awarded an EEA for the development and exploitation of certain oil discoveries on the Dussafu Project and on October 10, 2014, the field development plan was approved. The Company has four years from the date of the EEA approval to begin production. 

The Company is currently assessing alternatives to farm-down or sell the Dussafu project, while weighing the liquidity requirements necessary to maintain ongoing Company operations.

Operational activities during the six months ended June 30, 2016, included continued evaluation of development plans, based on the 3D seismic data acquired in late 2013 and processed during 2014. 

In June 2016, the Company conducted an impairment analysis of the unproved costs of the Dussafu PSC. The significant factors that impacted the evaluation were price forecasts, drilling costs and the number of companies engaged in evaluating an investment in the property through either a farm-down or acquisition.  Based on the June 2016 evaluation and our continuing operations, it is the opinion of the Company that the current carrying value is recoverable and no impairment to this Dussafu project is warranted as of  June 30, 2016.  If oil and natural gas prices continue to deteriorate or we fail to obtain adequate financing, farm-down or sell the asset, additional impairments may be required on our prospect.

We also reviewed the value of our oilfield inventories that are in the country of Gabon, of which the majority is steel conductor and casing.  At March 31, 2016, based on contemporaneous market prices, we impaired the value of this inventory by another $0.1 million.  At June 30, 2016, we determined no impairment was necessary leaving the value related to the inventory at $2.9 million.  

See Note 10 – Commitments and Contingencies for a discussion related to our Gabon operations.

The Dussafu PSC represents $30.9 million of unproved oil and natural gas properties including inventory on our June 30, 2016 balance sheet ($31.0 million at December 31, 2015).

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Debt and Financing

6 Months Ended

Jun. 30, 2016

Debt and Financing [Abstract]

Debt and Financing

Note 8 – Debt and Financing

As described in Note 1 – Organization,  on  June 19, 2015, we issued the CT Warrant, the9% Note, the15% Note and the Additional Draw Notein connection with the Securities Purchase Agreement with CT Energy and received proceeds of $30.6 million, net of financing fees of $1.6 million.  We identified embedded derivative assets and derivative liabilities in the notes and determined that the CT Warrant did not meet the required conditions to qualify for equity classification and was required to be classified as a  warrant derivative liability (see Note 9 – Warrant Derivative Liability).  The estimated fair value, at issuance, of the embedded derivative asset, described below, was $2.5 million, the embedded derivative liability, described below, was $13.5 million and the warrant derivative liability was $40.0 million.  In accordance with ASC 815, the proceeds were first allocated to the fair value of the embedded derivatives and warrant, which resulted in no value being attributable to the 9% Note and the 15% Note.

The following table summarizes the changes in our long-term debt due to related party, net of discount:

	As of June 30,
Long-Term Debt	2016
	(in thousands)
Beginning balance - January 1, 2016	$	214
Increase in  long-term debt due to the capitalization of accrued interest		1,736
Additional borrowings under the 15% Note		3,000
Additional Draw Note borrowing		2,000
Additional Draw Note - premium		447
Accretion of discount on debt		427
	$	7,824

At June 30, 2016, the amended face value of the 15% Note was$30.0 million.  The unamortized discount of the 15% Note was $24.6 million at June 30, 2016 and $25.0 million at December 31, 2015.  The Company will accrete the discount over the life of the 15% Note using the interest method.  Total interest expense for the three months ended June 30, 2016 associated with the15% Note from CT Energy, a related party, was $1.4 million, comprised of $1.1 million related to the stated rate of interest on the note and $0.3 million related to the accretion of the discount on the debt. Total interest expense for the six months ended June 30, 2016 associated with the15% Note from CT Energy, a related party, was $2.5 million, comprised of $2.1 million related to the stated rate of interest on the note and $0.4 million related to the accretion of the discount on the debt.  The fair value of the 15% Note at June 30, 2016 was $9.0 million, calculated using a Monte Carlo simulation.

CT Energy has agreed to lend Harvest $2.0 million per month for up to five months at 15% interest beginning on July 19, 2016, until the earlier of the Closing or the termination of the Share Purchase Agreement. These loans will be made under the Additional Draw Note, which is discussed above under “Securities Purchase Agreement.” The outstanding principal under the Additional Draw Note is $4.0 million, consisting of $2.0million loans by CT Energy on each on June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016.    See Additional Note Note below for further information.

15% Note

On June 19, 2015, in connection with the transaction with CT Energy described in Note 1 – Organization, we issued the 15% Note, afive-year note in the aggregate principal amount of $25.2 million with interest that is compounded quarterly at a rate of 15% per annum and is payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2015.  If by June 19, 2016, the volume weighted average price of the Company’s common stock over any consecutive 30-day period had not equaled or exceeded $2.50 per share, the maturity date of the 15% Note could have been extended by two years and the interest rate on the 15% Note would have been adjusted to 8.0% (the “15% Note Reset Feature”).  The lending of funds under of the Additional Draw Note extended the claim date and 15% Note Reset Feature.  See Additional Draw Note below for additional details.  During an event of default, the outstanding principal amount bears additional interest at a rate of 2.0% per annum higher than the rate otherwise applicable.

On January 4, 2016, the Company and CT Energy executed the first amendment to the 15% Note. The amendment converted the $1.0 million interest payment that would have been due and payable, less applicable withholding tax, into additional principal, such that the new principal amount of the 15% Note to $26.1 million as of January 1, 2016.

On and effective April 1, 2016, the Company and CT Energy executed a second amendment to the 15% Note. The second amendment converted the $1.0 million interest payment that would have been due and payable on April 1, 2016, less applicable withholding tax, into additional principal, such that the new principal amount of the 15% Note was $27.0 million as of April 1, 2016.

On May 3, 2016, the Company and CT Energy Holding executed and delivered a third amendment to the 15% Note.  The third Amendment increased the principal amount of the 15% Note to $30.0 million to reflect an additional loan of $3.0 million by CT Energy Holding to Harvest.  Additionally, the third amendment converts the $1.1 million accrued interest payment that would have been due and payable on July 1, 2016 less applicable withholding tax, into additional principal, such that the new principal amount of the 15% Note will be $30.9 million effective as of July 1, 2016.  As discussed above in Note 1 – Share Purchase Agreement,  $30.0 million in principal under the 15% Note will be cancelled as partial consideration upon the closing of the proposed sale of the Company’s Venezuelan interests.

The Company may prepay all or a portion of the note at a prepayment price equal to a make-whole price, as of the prepayment date, with respect to the principal amount of the note being prepaid, plus accrued and unpaid interest.  The make-whole price is defined as the greater of (i) 100% of such outstanding principal amount of the 15% Note and (ii)  the sum of the present values as of such date of determination of (A) such outstanding principal amount of the 15% Note, assumed, for the purpose of determining the present value thereof, to be paid on the earlier of the stated maturity of this 15% Note or the date that is two years after the date of determination, and (B) all remaining payments of interest (excluding interest accrued to the prepayment date) scheduled to become due and payable after the date of determination and on or before the date that is two years after the date of determination with respect to such outstanding principal amount of the 15% Note, in the case of each of the foregoing clauses (ii)(A) and (B), computed using a discount rate equal to the Treasury Rate as of the date of determination plus 50 basis points.

If an event of default occurs (other than an event of default related to certain bankruptcy events), holders of at least 25% of the outstanding principal of the 15% Note may declare the principal, premium, if any, and accrued and unpaid interest of such note immediately due and payable.  If an event of default related to specified bankruptcy events occurs, an amount equal to the make-whole price for the 15% Note plus accrued and unpaid interest is immediately due and payable. 

We have evaluated the 15% Note Reset Feature related to the interest rate and maturity date using “ASC 815 Derivatives and Hedging”.  Because the interest rate and maturity date reset are linked to achievement of a certain stock price, the feature is not considered clearly and closely related to the debt host. In addition, the interest rate at the reset date is not tied to any approximation of the expected market rate at the date of the term extension as required by ASC 815.  As a result, we are accounting for the 15% Note Reset Feature as an embedded derivative asset that has been measured at fair value with current changes in fair value reflected in our consolidated condensed statements of operations and comprehensive loss.

The embedded 15% Note Reset Feature in the 15% Note was valued using the ‘with’ and ‘without’ method.  A Black-Derman-Toy (“BDT”) Model, which is a binomial interest rate lattice model, was used to value the 15% Note and the incremental value attributed to the embedded option was determined based on a comparison of the value of the 15% Note with the feature included and without the feature included.  Key inputs into this valuation model are the U.S. Treasury rate, our credit spread and the underlying yield volatility.  As part of our overall valuation process, management employs processes to evaluate and validate the methodologies, techniques and inputs, including review and approval of valuation judgments, methods, models, process controls, and results. These processes are designed to help ensure that the fair value measurements and disclosures are appropriate, consistently applied, and reliable. We estimate the yield volatility for the 15% Note based on historical daily volatility of the USD denominated Venezuela Sovereign zero coupon yield over a look back period of 3.97 years.  The risk-free interest rate is based on the U.S. Treasury yield curve as of the valuation dates for a maturity similar to the expected remaining life of the 15% Note. The credit spread was estimated based on the option adjusted spread (“OAS”) of the Venezuelan yield over the USD Treasury yield and the implied OAS for the transaction as of the date the term sheet was signed to capture the investor’s assessment of the risk in their investment in the Company.  This model requires Level 3 inputs (see Note 3 – Summary of Significant Accounting Policies, Financial Instruments and Fair Value Measurements) which were based on our estimates of the probability and timing of potential future financings and fundamental transactions.

The embedded derivative asset related to the 15% Note contains a Level 3 input related to the probability of our investor lending us additional funds or not lending us funds according to the terms of the loan agreement for the additional draws, as discussed below.  We have assumed a  70/30 scenario (50/50 scenario at December 31, 2015) of the draw or no draw for valuation of the embedded derivative asset. 

The assumptions summarized in the following table were used to calculate the fair value of the derivative asset associated with the 15% Note that was outstanding as of June 30, 2016 on our consolidated condensed balance sheet:

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Weighted Term (years)			3.97
Yield Volatility	Level 2 input		40	%
Risk-free rate	Level 1 input		0.9% to 1.1	%
Dividend yield	Level 2 input		0.0	%
Scenario probability:
Claim Date extended with Stock Appreciation Date threshold met	Level 3 input		59.4	%
Claim Date extended with Stock Appreciation Date threshold not met	Level 3 input		36.8	%
Claim Date not extended with Stock Appreciation Date threshold met	Level 3 input		59.4	%
Claim Date not extended with Stock Appreciation Date threshold not met	Level 3 input		34.2	%
Scenario probability (future draws/no future draws)	Level 3 input		70%/30	%

The fair value of the embedded derivative asset related to the 15% Note Reset Featurewas $6.7 millionatJune 30, 2016and $5.0 million at December 31, 2015.  We recognized $1.7 million in changes in fair value of embedded derivative asset in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2016.  We recognized $0.6 million in derivative expense related to this embedded derivative asset and liabilities in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2015.

Additional Draw Note

On June 19, 2015, in connection with the transaction with CT Energy described in Note 1 – Organization, the Company also issued the Additional Draw Note under which CT Energy may elect to provide $2.0 million of additional funds to the Company per month for up to six months following the one-year anniversary of the closing date of the transaction (up to $12.0 million in aggregate).  For funds loaned under the Additional Draw Note, interest will be compounded quarterly at a rate of 15.0% per annum and will be payable quarterly on the first business day of each January, April, July and October, commencing October 1, 2016.  If by the Claim Date, the volume weighted average price of the Company’s common stock over any consecutive 30-day period has not equaled or exceeded $2.50 per share, the maturity date of the Additional Draw Note could have been extended by two years and the interest rate on the Additional Draw Note will adjust to 8.0%, (the “Additional Draw Note Reset Feature”).  However, while CT Energy is making the monthly $2.0 million loans under the Additional Draw Note, as CT Energy currently has committed to do under the Share Purchase Agreement, the Claim Date will be extended. During an event of default, the outstanding principal amount will bear additional interest at a rate of 2.0% per annum higher than the rate otherwise applicable.

The Company may prepay all or a portion of the Additional Draw Note at a prepayment price equal to the make-whole price, as of the prepayment date, with respect to the principal amount of the Additional Draw Note being prepaid, plus accrued and unpaid interest. The make-whole price with respect to the Additional Draw Note has the same meaning described above with respect to the 15% Note.

If an event of default occurs (other than an event of default related to certain bankruptcy events), holders of at least 25% of the outstanding principal of the Additional Draw Note may declare the principal, premium, if any, and accrued and unpaid interest of such note immediately due and payable.  If an event of default related to specified bankruptcy events occurs, an amount equal to the make-whole price for the Additional Draw Note plus accrued and unpaid interest is immediately due and payable.  

As discussed above in Note 1 – Share Purchase Agreement, the outstanding principal under the Additional Draw Note is $4.0 million, consisting of loans of $2.0 million by CT Energy on each of June 20, 2016 and July 19, 2016. The Company expects that the outstanding principal will increase to $6.0 million on August 19, 2016 and to $8.0 million on September 19, 2016.  Upon the closing of the proposed sale of the Company’s Venezuelan interests, the $80.0 million in cash consideration to be paid by CT Energy would be reduced by the amount of outstanding principal and accrued interest under the Additional Draw Note (and the Additional Draw Note would be cancelled).

At issuance and at December 31, 2015, we assigned no value to the Additional Draw Note or Additional Draw Note Reset Feature, as it did not at issuance meet the definition of derivatives in ASC 815 and there was no principal amount outstanding.  

At June 30, 2016, due to the $2.0 million loaned under the Additional Draw Note on June 20, 2016, we evaluated the Additional Draw Note Reset Feature related to the interest rate and maturity date using “ASC 815 Derivatives and Hedging”.  Because the interest rate and maturity date reset are linked to achievement of a certain stock price, the feature is not considered clearly and closely related to the debt host. In addition, the interest rate at the reset date is not tied to any approximation of the expected market rate at the date of the term extension as required by ASC 815.  As a result, we are accounting for the Additional Draw Note Reset Feature as an embedded derivative asset that has been measured at fair value with current changes in fair value reflected in our consolidated condensed statements of operations and comprehensive loss.  The embedded Additional Draw Note Reset Feature in the Additional Draw Note was valued using the same methods and assumptions as the 15% Note Reset Feature discussed above. 

The fair value of the embedded derivative asset related to the Additional Draw Note Reset Feature was $0.4 million at June 30, 2016.  We recognized $0.0 million for the three and six months ended June 30, 2016 in change in fair value of embedded derivative assets in our consolidated condensed statement of operations and comprehensive loss since the fair value at the inception date of June 20, 2016 for the Additional Draw Note Reset Feature approximated the fair value at June 30, 2016.

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Warrant Derivative Liability

6 Months Ended

Jun. 30, 2016

Warrant Derivative Liability [Abstract]

Warrant Derivative Liability

Note 9 – Warrant Derivative Liability

CT Warrant

On June 19, 2015, in connection with the transaction with CT Energy described in Note 1 – Organization, we issued the CT Warrant which is exercisable for 34,070,820 shares of the Company’s common stock at an initial exercise price of $1.25 per share.  The CT Warrant may not be exercised until the volume weighted average price of the Company’s common stock over any consecutive 30-day period equals or exceeds $2.50 per share.

The CT Warrant can be exercised at the option of the investor in cash or by effecting a reduction in the principal amount of the 15% Note (See Note 8 – Debt and Financing).  If the CT Warrant is exercised through the reduction in the principal amount of the 15% Note, the reduction will be equal to the amount obtained by multiplying the number of shares of common stock for which the CT Warrant is exercised by (i) the exercise price then in effect divided by (ii) (A) the defined make-whole price with respect to the outstanding principal amount of such 15% Note divided by (B) the outstanding principal amount of such 15% Note.  The exercise price of the CT Warrant is subject to adjustment upon the occurrence of certain events, including stock issuance, dividend or stock split.

In addition, the holder of the CT Warrant has certain registration rights regarding the CT Warrant and the shares of common stock issuable upon exercise of the CT Warrant.

We have analyzed the CT Warrant to determine whether it should be classified as a derivative liability or equity instrument.  Provisions of the CT Warrant agreement allow for a change in the exercise price of the CT Warrant upon the occurrence of certain corporate events.  These exercise price adjustments incorporate variables other than those used to determine the fair value of a fixed-for-fixed forward or option on equity shares therefore the CT Warrant is not considered to be “indexed to the issuer’s own stock” and does not meet the exception from derivative treatment in ASC 815.  We continue to account for the CT Warrant as a derivative which was marked to market as of June 30, 2016.  

Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques (such as the Monte Carlo model) are highly volatile and sensitive to changes in the trading market price of our common stock. Since derivative financial instruments are initially and subsequently carried at fair value, our income will reflect the volatility in these estimate and assumption changes.  A Monte Carlo simulation model is used to value the CT Warrant to estimate if the Stock Appreciation Date is achieved, which is based on the average stock price over a 30 day period (21 trading days) reaching $2.50.  This requires Level 3 inputs (see Note 3 – Summary of Significant Accounting Policies, Financial Instruments and Fair Value Measurements) which are fundamentally based on market data but require complex modeling.  The additional modeling is required in order to simulate future stock prices, to determine whether the Stock Appreciation Date is achieved and to model the projected exercise behavior of the warrant holders.

The assumptions summarized in the following table were used to calculate the fair value of the warrant derivative liability that was outstanding as of the balance sheet date presented on our consolidated condensed balance sheet:

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Stock price	Level 1 input	$	0.84
Exercise price	Level 1 input	$	1.25
Stock appreciation date price (hurdle)	Level 1 input	$	2.50
Term (warrants)			1.9681
Term (Claim Date)			0.0519
Term (Claim Date extended)			0.4699
Volatility	Level 2 input		135.0	%
Risk-free rate (warrants)	Level 1 input		0.63	%
Risk-free rate (Claim Date)	Level 1 input		0.37	%
Risk-free rate (Claim Date extended)	Level 1 input		0.41	%
Dividend yield	Level 2 input		0.0	%

Inherent in the Monte Carlo valuation model are assumptions related to expected stock price volatility, expected life, risk-free interest rate and dividend yield. As part of our overall valuation process, management employs processes to evaluate and validate the methodologies, techniques and inputs, including review and approval of valuation judgments, methods, models, process controls, and results. These processes are designed to help ensure that the fair value measurements and disclosures are appropriate, consistently applied, and reliable. We estimate the volatility of our common stock based on historical volatility that matches the expected remaining life of the longest instrument in the transaction, seven years. The risk-free interest rate is based on the U.S. Treasury yield curve as of the valuation dates for a maturity similar to the expected remaining life of the CT Warrant. The expected life of the CT Warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which we anticipate to remain at zero.

The fair value of the CT Warrant was $16.4 million at June 30, 2016and $5.5 million at December 31, 2015.  We recognized$6.9million and $10.9 million, respectively, in change in fair value of warrant liabilities in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2016.  We recognized income of $2.4 million in change in fair value of warrant liabilities in our consolidated condensed statement of operations and comprehensive loss for the three and six months ended June 30, 2015.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 10 – Commitments and Contingencies

We have various contractual commitments pertaining to leasehold, training, and development costs for the Dussafu PSC totaling $4.5 million. Under the EEA granted for the Dussafu PSC on July 17, 2014, we are required to commence production within four years of the date of grant in order to preserve our rights to production under the EEA.  We expect that significant capital expenditures will be required prior to commencement of production. These work commitments are non-discretionary; however, we do have the ability to control the pace of expenditures.

Under the agreements with our partner in the Dussafu PSC, we are jointly and severally liable to various third parties. As of June 30, 2016, the gross carrying amount associated with obligations to third parties which were fixed at the end of the period was $0.1 million ($0.3 million as of December 31, 2015) and is related to accounts payable to vendors, accrued expenses and withholding taxes payable to taxing authorities. As we are currently the operator for the Dussafu PSC, the gross carrying amount related to accounts payable and withholding taxes are reflected in the consolidated condensed balance sheet in accounts payable.  The net amount related to other accrued expenses is reflected in accrued expenses in the consolidated condensed balance sheet. Our partners have obligations totaling $36thousand as of June 30, 2016  ($0.1 million as of December 31, 2015) to us for these liabilities. As we expect our partners will continue to meet their obligations to fund their share of expenditures, we have not recognized any additional liability related to fixed joint interest obligations attributable to our joint interest partners. 

The following related class action lawsuits were filed on the dates specified in the United States District Court, Southern District of Texas: John Phillips v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (March 22, 2013); Sang Kim v. Harvest Natural Resources, Inc., James A. Edmiston, Stephen C. Haynes, Stephen D. Chesebro’, Igor Effimoff, H. H. Hardee, Robert E. Irelan, Patrick M. Murray and J. Michael Stinson (April 3, 2013); Chris Kean v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 11, 2013); Prastitis v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 17, 2013); Alan Myers v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 22, 2013); and Edward W. Walbridge and the Edward W. Walbridge Trust v. Harvest Natural Resources, Inc., James A. Edmiston and Stephen C. Haynes (April 26, 2013). The complaints allege that the Company made certain false or misleading public statements and demand that the defendants pay unspecified damages to the class action plaintiffs based on stock price declines. All of these actions have been consolidated into the John Phillips v. Harvest Natural Resources, Inc., James A. Edminston and Stephen C. Haynes (March 22, 2013). The Company and the other named defendants have filed a motion to dismiss and intend to vigorously defend the consolidated lawsuits.  We are currently unable to estimate the amount or range of any possible loss.

In May 2012, Newfield Production Company (“Newfield”) filed notice pursuant to the Purchase and Sale Agreement between Harvest (US) Holdings, Inc. (“Harvest US”), a wholly owned subsidiary of Harvest, and Newfield dated March 21, 2011 (the “PSA”) of a potential environmental claim involving certain wells drilled on the Antelope Project. The claim asserts that locations constructed by Harvest US were built on, within, or otherwise impact or potentially impact wetlands and other water bodies. The notice asserts that, to the extent of potential penalties or other obligations that might result from potential violations, Harvest US must indemnify Newfield pursuant to the PSA. In June 2012, we provided Newfield with notice pursuant to the PSA (1) denying that Newfield has any right to indemnification from us, (2) alleging that any potential environmental claim related to Newfield’s notice would be an assumed liability under the PSA and (3) asserting that Newfield indemnify us pursuant to the PSA. We dispute Newfield’s claims and plan to vigorously defend against them.  We are currently unable to estimate the amount or range of any possible loss.

On February 27, 2015, Harvest (US) Holdings, Inc. (“Harvest US”), a wholly owned subsidiary of Harvest, Branta, LLC and Branta Exploration & Production Company, LLC   filed a complaint against Newfield in the United States District Court for the District of Colorado. The plaintiffs previously sold oil and natural gas assets located in Utah’s Uinta Basin to Newfield pursuant to two Purchase and Sale Agreements, each dated March 21, 2011. In the complaint, the plaintiffs allege that, prior to the sale, Newfield breached separate confidentiality agreements with Harvest US and Branta by discussing the auction of the assets with a potential bidder for the assets, which caused the potential bidder not to participate in the auction and resulted in a depressed sales price for the assets. The complaint seeks damages and fees for breach of contract, violation of the Colorado Antitrust Act, violation of the Sherman Antitrust Act and tortious interference with a prospective business advantage. In September 2015, plaintiffs amended their complaint to add Ute Energy, LLC and Crescent Point Energy Corporation as defendants. Subsequently, plaintiffs agreed to dismiss with prejudice all claims against Ute Energy, LLC and Crescent Point Energy Corporation.

On May 31, 2011, the United Kingdom branch of our subsidiary, Harvest Natural Resources, Inc. (UK), initiated a wire transfer of approximately $1.1 million ($0.7 million net to our 66.667 percent interest) intending to pay Libya Oil Gabon S.A. (“LOGSA”) for fuel that LOGSA supplied to our subsidiary in the Netherlands, Harvest Dussafu, B.V., for the company’s drilling operations in Gabon. On June 1, 2011, our bank notified us that it had been required to block the payment in accordance with the U.S. sanctions against Libya as set forth in Executive Order 13566 of February 25, 2011, and administered by OFAC, because the payee, LOGSA, may be a blocked party under the sanctions. The bank further advised us that it could not release the funds to the payee or return the funds to us unless we obtain authorization from OFAC. On October 26, 2011, we filed an application with OFAC for return of the blocked funds to us. Until that application is approved, the funds will remain in the blocked account, and we can give no assurance when OFAC will permit the funds to be released. On April 23, 2014, we received a notice that OFAC had denied our October 26, 2011 application for the return of the blocked funds.  During the year ended December 31, 2015 primarily due to the passage of  time, we recorded a $0.7 million allowance for doubtful accounts to general and administrative costs associated with the blocked payment and $0.4 million receivable from our joint venture partner.   On October 13, 2015, we filed a request that OFAC reconsider its decision and on March 8, 2016 OFAC denied our October 13, 2015 request for the return of blocked funds; however, the Company will continue attempts to recover the funds from OFAC.

Uracoa Municipality Tax Assessments. Harvest Vinccler, a subsidiary of Harvest Holding, has received nine assessments from a tax inspector for the Uracoa municipality in which part of the Uracoa, Tucupita and Bombal fields are located as follows:

· Three claims were filed in July 2004 and allege a failure to withhold for technical service payments and a failure to pay taxes on the capital fee reimbursement and related interest paid by PDVSA under the Operating Service Agreement (“OSA”). Harvest Vinccler has filed a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss one of the claims and has protested with the municipality the remaining claims.

· Two claims were filed in July 2006 alleging the failure to pay taxes at a new rate set by the municipality. Harvest Vinccler has filed a protest with the Tax Court in Barcelona, Venezuela, on these claims.

· Two claims were filed in August 2006 alleging a failure to pay taxes on estimated revenues for the second quarter of 2006 and a withholding error with respect to certain vendor payments. Harvest Holding has filed a protest with the Tax Court in Barcelona, Venezuela, on one claim and filed a protest with the municipality on the other claim.

· Two claims were filed in March 2007 alleging a failure to pay taxes on estimated revenues for the third and fourth quarters of 2006. Harvest Vinccler has filed a protest with the municipality on these claims.

Harvest Vinccler disputes the Uracoa tax assessments and believes it has a substantial basis for its positions based on the interpretation of the tax code by SENIAT (the Venezuelan income tax authority), as it applies to operating service agreements, Harvest Holding has filed claims in the Tax Court in Caracas against the Uracoa Municipality for the refund of all municipal taxes paid since 1997.  Any potential liability for the Uracoa tax assessents would remain the responsibility of Harvest Vinccler upon the closing of the proposed sale of our Venezuelan interests.

Libertador Municipality Tax Assessments. Harvest Vinccler has received five assessments from a tax inspector for the Libertador municipality in which part of the Uracoa, Tucupita and Bombal fields are located as follows:

· One claim was filed in April 2005 alleging the failure to pay taxes at a new rate set by the municipality. Harvest Vinccler has filed a protest with the Mayor’s Office and a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss the claim. On April 10, 2008, the Tax Court suspended the case pending a response from the Mayor’s Office to the protest. If the municipality’s response is to confirm the assessment, Harvest Holding will defer to the Tax Court to enjoin and dismiss the claim.

· Two claims were filed in June 2007. One claim relates to the period 2003 through 2006 and seeks to impose a tax on interest paid by PDVSA under the OSA. The second claim alleges a failure to pay taxes on estimated revenues for the third and fourth quarters of 2006. Harvest Vinccler has filed a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss both claims.

· Two claims were filed in July 2007 seeking to impose penalties on tax assessments filed and settled in 2004. Harvest Vinccler has filed a motion with the Tax Court in Barcelona, Venezuela, to enjoin and dismiss both claims.

Harvest Vinccler disputes the Libertador allegations set forth in the assessments and believes it has a substantial basis for its position. As a result of the SENIAT’s interpretation of the tax code as it applies to operating service agreements, Harvest Vinccler has filed claims in the Tax Court in Caracas against the Libertador Municipality for the refund of all municipal taxes paid since 2002.

On May 4, 2012, Harvest Vinccler learned that the Political Administrative Chamber of the Supreme Court of Justice issued a decision dismissing one of Harvest Vinccler’s claims against the Libertador Municipality. Harvest Vinccler continues to believe that it has sufficient arguments to maintain its position in accordance with the Venezuelan Constitution. Harvest Vinccler plans to present a request of Constitutional Revision to the Constitutional Chamber of the Supreme Court of Justice once it is notified officially of the decision. Harvest Vinccler has not received official notification of the decision. Harvest Vinccler is unable to predict the effect of this decision on the remaining outstanding municipality claims and assessments.

On January 15, 2015, HNR Finance and Harvest Vinccler S.C.A submitted a Request for Arbitration against the Government of Venezuela before the International Centre for Settlement of Investment Disputes ("ICSID") regarding HNR Finance's interest in Petrodelta.  The Request for Arbitration set forth numerous claims, including (a) the failure of the Venezuelan government to approve the Company’s negotiated sale of its 51 percent interest in Harvest Holding to Petroandina on any reasonable grounds in 2013-2014, resulting in the termination of the SPA (b) the failure of the Venezuelan government to approve the Company’s previously negotiated sale of its interest in Petrodelta to PT Pertamina (Persero) on any reasonable grounds in 2012-2013, resulting in the termination of a purchase agreement entered into between HNR Energia and PT Pertamina (Persero); (c) the failure of the Venezuelan government to allow Petrodelta to pay approved and declared dividends for 2009; (d) the failure of the Venezuelan government to allow Petrodelta to approve and declare dividends since 2010, in violation of Petrodelta’s bylaws and despite Petrodelta’s positive financial results between 2010 and 2013; (e) the denial of Petrodelta’s right to fully explore the reserves within its designated areas; (f) the failure of the Venezuelan government to pay Petrodelta for all hydrocarbons sales since Petrodelta’s incorporation, recording them instead as an ongoing balance in the accounts of PDVSA, the Venezuelan government-owned oil company that controls Venezuela’s 60 percent interest in Petrodelta, and as a result disregarding Petrodelta’s managerial and financial autonomy; (g) the failure of the Venezuelan government to pay Petrodelta in US dollars for the hydrocarbons sold to PDVSA, as required under the mixed company contract; (h) interference with Petrodelta’s operations, including PDVSA’s insistence that PDVSA and its affiliates act as a supplier of materials and equipment and provider of services to Petrodelta; (i) interference with Petrodelta’s financial management, including the use of low exchange rates Bolivars/US dollars to the detriment of the Company and to the benefit of the Venezuelan government, PDVSA and its affiliates; and (j) the forced migration of the Company’s investment in Venezuela from an operating services agreement to a mixed company structure in 2007.

On January 26, 2015, Petroandina, which owns a 29 percent interest in Harvest Holding, filed a complaint for breach of contract against the Company and its subsidiary HNR Energia in the Court of Chancery of the State of Delaware (“Court of Chancery”).  The complaint states that HNR Energia breached provisions of the Shareholders Agreement between Petroandina and HNR Energia, which provisions require HNR Energia to provide advance notice of, and deposit $5.0 million into an escrow account, before bringing any claim against the Venezuelan government. Under those provisions, if Petroandina so requests, an appraisal of Petroandina's 29 percent interest in Harvest Holdings must be performed, and Petroandina has the right to require HNR Energia to purchase that 29 percent interest at the appraised value.  Petroandina's claim requests that, among other things, the court (a) declare that HNR Energia has breached the Shareholders' Agreement by submitting the Request for Arbitration against the Venezuelan government on January 15, 2015 (which Request for Arbitration was subsequently withdrawn without prejudice); (b) declare that the Company has breached its guaranty of HNR Energia's obligations under the Shareholders' Agreement; (c) direct the Company and HNR Energia to refrain from prosecuting any legal proceeding against the Venezuelan government (including the previously filed Request for Arbitration) until such time as they have complied with the relevant provisions of the Shareholders' Agreement; (d) award Petroandina costs and fees related to the lawsuit; and (e) award Petroandina such other relief as the court deems just and proper.  On January 28, 2015, the Court of Chancery issued an injunction ordering the Company and HNR Energia to withdraw the Request for Arbitration and not take any action to pursue its claims against Venezuela until Harvest and HNR Energia have complied with the provisions of the Shareholders’ Agreement or otherwise reached an agreement with Petroandina.  Accordingly, on January 28, 2015, HNR Finance B.V. and Harvest Vinccler S.C.A. withdrew without prejudice the Request for Arbitration. In the Delaware proceeding, the Company and HNR Energia have until August 23, 2016 to respond to Petroandina’s complaint.  We are currently unable to estimate the amount or range of any possible loss.

On  July 12, 2016, Petroandina filed a claim against the Company and HNR Energia in the Court of Chancery of the State of Delaware alleging that, by entering into the Share Purchase Agreement with CT Energy, the Company and HNR Energia breached the Shareholders’ Agreement. Petroandina filed this claim by amending the breach of contract claim previously filed in the Chancery Court on January 26, 2015.  The July 12, 2016 complaint requests that the Court of Chancery grant an injunction to prevent the Company and HNR Energia from completing the proposed transaction with CT Energy.  A hearing before the Court of Chancery regarding Petroandina’s injunction request is scheduled for August 16, 2016.  The Company currently is vigorously defending its right to complete the proposed transaction with CT Energy under the terms of the Share Purchase Agreement. 

We are a defendant in or otherwise involved in other litigation incidental to our business. In the opinion of management, there is no such incidental litigation that will have a material adverse effect on our financial condition, results of operations and cash flows.

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Operating Segments

6 Months Ended

Jun. 30, 2016

Operating Segments [Abstract]

Operating Segments

Note 11 – Operating Segments

We regularly allocate resources to and assess the performance of our operations by segments that are organized by unique geographic and operating characteristics. The segments are organized in order to manage regional business, currency and tax related risks and opportunities. Operations included under the heading “United States” include corporate management, cash management, business development and financing activities performed in the United States and other countries, which do not meet the requirements for separate disclosure. All intersegment revenues, other income and equity earnings, expenses and receivables are eliminated in order to reconcile to consolidated totals. Corporate general and administrative and interest expenses are included in the United States segment and are not allocated to other operating segments. Segment loss and operating segment assets for prior periods have been adjusted to conform to the current presentation method in which intersegment items are eliminated from each segment’s results and assets. 

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Segment Loss Attributable to Harvest
Venezuela	$	(258)	$	(85)	$	(2,820)	$	(108)
Gabon		(213)		(934)		(1,023)		(2,848)
Indonesia		—		(2)		—		(55)
United States and other		(12,427)		(24,404)		(23,151)		(28,031)
Net loss attributable to Harvest (a)	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)

a) Net of net loss attributable to noncontrolling interest owners.

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)
Operating Segment Assets
Venezuela	$	115	$	5,290
Gabon		31,259		32,710
Indonesia		—		5
United States and other		11,060		9,776
Total assets	$	42,434	$	47,781

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Related Party Transactions

6 Months Ended

Jun. 30, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Note 12 – Related Party Transactions

The noncontrolling interest owners in Harvest Holdings, Vinccler (currently owning 20 percent) and Petroandina (currently owning 29 percent) are both related parties of the Company. 

On January 4, April 1, and May 3, 2016, Harvest entered into first, second and third amendments, respectively, to the 15% Note.  Each amendment eliminated an interest payment and increased the principal amount of the 15% Note by the amount of the eliminated interest payment, less applicable withholding tax of $0.1 million for January 4 and April 1, 2016. Additionally, the third amendment also increased the principal amount of the 15% Note by $3.0 million in connection with additional funds received from CT Energy.  After taking into account the third amendment, the outstanding principal amount of the 15% Note was  $30.9 million as of July 1, 2016.

On January 4, 2016, HNR Finance provided a loan to CT Energia in the amount of $5.2 million under an 11.0% promissory note due 2019 (the “CT Energia Note”). The purpose of the loan is to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta that is 40% owned by HNR Finance and through which Harvest’s Venezuelan oil and natural gas interests are held. The loans to Petrodelta are to assist Petrodelta in satisfying its working capital needs and discharging its obligations. Interest on the CT Energia Note is due and payable on the first of each January and July, commencing July 1, 2016. The full amount outstanding, including any unpaid accrued interest, is due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan is the payments of principal and interest from loans that CT Energia has made to Petrodelta. If and when CT Energia receives payments of principal or interest from loans it has made to Petrodelta, then those proceeds must be used to pay unpaid interest and principal under the CT Energia Note. No interest payments under the CT Energy note have been made as of August 8, 2016.  All payments made by CT Energia to HNR Finance under the CT Energia Note must be made in U.S. Dollars.  The source of funds for HNR Finance’s $5.2 million loan to CT Energia was a capital contribution from Harvest Holding, which, in return, received the same aggregate amount of capital contributions from its shareholders, pro rata according to their equity interests in Harvest Holding. Of that aggregate amount of capital contributions, HNR Energia contributed $2.6 million, which was a capital contribution from Harvest.    The Management Agreement the Company entered into with CT Energia also makes CT Energia a related party.  During the three months ended March 31, 2016, we recorded a $5.2 million allowance to fully reserve the CT Energia Note due to concerns related to the continued deteriorating economic conditions in Venezuela and our assessment relating to the probability that the CT Energia Note will be collected and we are not accruing interest on this note receivable. 

On June 20, 2016, CT Energy, loaned $2.0 million to the Company, pursuant to the Additional Draw Note. As previously disclosed, Harvest sold the Additional Draw Note to CT Energy pursuant to Securities Purchase Agreement. The Securities Purchase Agreement provides that CT Energy can elect to loan, under the Additional Draw Note, $2.0 million to Harvest per month for up to six months beginning on June 20, 2016. The June 20, 2016 loan is, and any additional loans under the Additional Draw Note will be, secured by substantially all of the Harvest’s assets, including equity in certain of Harvest’s subsidiaries, as further described in the security agreement that was executed in connection with the Securities Purchase Agreement.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated condensed financial statements include the accounts of all wholly-owned and majority-owned subsidiaries. All intercompany profits, transactions and balances have been eliminated. Third-party interests in our majority-owned subsidiaries are presented as noncontrolling interests owners.

Reclassifications

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.  These reclassifications did not affect our consolidated condensed financial results.

Note Receivable

Note Receivable

A loan is considered impaired if it is probable, based on current information and events, that the Company will be unable to collect all amounts due according to the contractual terms of the loan. Loans are reviewed for impairment and include loans that are past due, non-performing or in bankruptcy. Recognition of interest income is suspended and the loan is placed on non-accrual status when management determines that collection of future interest income is not probable. Accrual is resumed, and previously suspended interest income is recognized, when the loan becomes contractually current and/or collection doubts are removed. Cash receipts on impaired loans are recorded first against the receivable and then to any unrecognized interest income.

Investment in Affiliate

Investment in Affiliate

We are accounting for our investment in Petrodelta under Accounting Standards Codification (“ASC”) 325 – Investments – Other (the “cost method”).  Under the cost method we will not recognize any equity in earnings from our investment in Petrodelta in our results of operations, but will recognize any cash dividends in the period they are received.  

As of December 31, 2015, we fully impaired the carrying value of our investment in Petrodelta.  See Note 5 – Investment in Affiliate for further information.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Other important significant estimates are those included in the valuation of our assets and liabilities that are recorded at fair value on a recurring and non-recurring basis.  Actual results could differ from those estimates.

Oil and Natural Gas Properties

Oil and Natural Gas Properties

The major components of property and equipment are as follows: 

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)
Unproved property costs - Dussafu PSC	$	28,045	$	28,000
Oilfield inventories		2,878		3,006
Other administrative property		3,176		2,937
Total property and equipment		34,099		33,943
Accumulated depreciation		(2,533)		(2,482)
Total property and equipment, net	$	31,566	$	31,461

Other Administrative Property

Other Administrative Property

Furniture, fixtures and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives, which range from three to five years. Leasehold improvements are recorded at cost and amortized using the straight-line method over the life of the applicable lease. For the three and six months ended June 30, 2016, depreciation expense was $14 thousand and $40 thousand, respectively.  For the three and six months ended June 30, 2015, depreciation expense was $27 thousand and $56 thousand, respectively.

Other Assets

Other Assets

Other assets at June 30, 2016 and December 31, 2015 include deposits and retainers.  During 2015 we fully reserved the $1.1 million blocked payment related to our drilling operations in Gabon.  The payment was blocked in accordance with the U.S. sanctions against Libya as set forth in Executive Order 13566 of February 25, 2011, and administered by the United States Treasury Department’s Office of Foreign Assets Control (“OFAC”).  See Note 10 – Commitments and Contingencies.   At December 31, 2015, we recorded an allowance for doubtful accounts of $0.7 million and the remaining balance of the blocked payment was reclassified to a receivable from our joint venture partners for $0.4 million. 

Capitalized Interest

Capitalized Interest

We capitalize interest costs for qualifying oil and natural gas properties. The capitalization period begins when expenditures are incurred on qualified properties, activities begin which are necessary to prepare the property for production and interest costs have been incurred. The capitalization period continues as long as these events occur.  The average additions for the period are used in the interest capitalization calculation. During the three and six months ended June 30, 2016 and 2015, we did not capitalize interest costs due to insufficient on-going activity related to our oil and natural gas activities.

Fair Value Measurements

Fair Value Measurements

We measure and disclose our fair values in accordance with the provisions of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a three-level hierarchy, which encourages an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the hierarchy are defined as follows:

· Level 1 – Inputs to the valuation techniques that are quoted prices in active markets for identical assets or liabilities.

· Level 2 – Inputs to the valuation techniques that are other than quoted prices but are observable for the assets or liabilities, either directly or indirectly.

· Level 3 – Inputs to the valuation techniques that are unobservable for the assets or liabilities.

Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, accounts receivable, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), debt, embedded derivatives and warrant derivative liability. We maintain cash and cash equivalents in bank deposit accounts with commercial banks, which at times may exceed the federally insured limits. We have not experienced any losses from such investments. Concentrations of credit risk with respect to accounts receivable are limited due to the nature of our receivables. In the normal course of business, collateral is not required for financial instruments with credit risk.  The estimated fair value of cash and cash equivalents and accounts receivable, prepaid costs, accounts payable, accrued expenses and other current liabilities approximate their carrying value due to their short-term nature (Level 1).  The following tables set forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value as of June 30, 2016 and December 31, 2015.  During the year ended December 31, 2015, we impaired the carrying value of our Dussafu project in Gabon by $23.2 million and our investment in affiliate by $164.7 million.  See Note 5 – Investment in Affiliate and Note 7 – Gabon for more information.

	As of June 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Recurring
Assets:
Embedded derivative asset - 15% Note	$	—	$	—	$	6,697	$	6,697
Embedded derivative asset - Additional Draw Note		—		—		447		447
	$	—	$	—	$	7,144	$	7,144
Liabilities:
SARs liability	$	—	$	93	$	241	$	334
RSUs liability		—		520		—		520
Warrant derivative liability		—		—		16,417		16,417
	$	—	$	613	$	16,658	$	17,271

	As of December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Non recurring
Assets:
Dussafu PSC	$	—	$	—	$	28,000	$	28,000
	$	—	$	—	$	28,000	$	28,000
Recurring
Assets:
Embedded derivative asset	$	—	$	—	$	5,010	$	5,010
	$	—	$	—	$	5,010	$	5,010
Liabilities:
SARs liability	$	—	$	46	$	50	$	96
RSUs liability		—		174		—		174
Warrant derivative liability		—		—		5,503		5,503
	$	—	$	220	$	5,553	$	5,773

As of June 30, 2016, the fair value of our liability awards included $0.3 million for our SARs and $0.5 million for the RSUs both of which were recorded in accrued expenses.   As of December 31, 2015, the fair value of our liability awards included $0.1 million for our SARs which were recorded in accrued expenses and $0.2 million for our RSUs which were recorded in accrued expenses and other long-term liabilities.

Derivative Financial Instruments

As required by ASC 820, a financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.  See Note 9 – Warrant Derivative Liability for a description and discussion of our warrant derivative liability as well as a description of the valuation models and inputs used to calculate the fair value.  See Note 8 – Debt and Financing for a description and discussion of our embedded derivatives related to our 15% Note as well as a description of the valuation models and inputs used to calculate the fair value.  All of our embedded derivatives and warrants are classified as Level 3 within the fair value hierarchy. 

Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis

The following table provides a reconciliation of financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial assets -  embedded derivative asset:
Beginning balance	$	5,001	$	—	$	5,010	$	—
Additions		447		2,504		447		2,504
Change in fair value		1,696		123		1,687		123
Ending balance	$	7,144	$	2,627	$	7,144	$	2,627

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  embedded derivative liability:
Beginning balance	$	—	$	—	$	—	$	—
Additions - fair value at issuance		—		13,449		—		13,449
Change in fair value		—		(434)		—		(434)
Ending balance	$	—	$	13,015	$	—	$	13,015

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  warrant derivative liability:
Beginning balance	$	9,564	$	—	$	5,503	$	—
Additions		—		40,013		—		40,013
Change in fair value		6,853		(2,418)		10,914		(2,418)
Ending balance	$	16,417	$	37,595	$	16,417	$	37,595

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  stock appreciation rights
Beginning balance	$	120	$	—	$	50	$	—
Change in fair value		121		—		191		—
Ending balance	$	241	$	—	$	241	$	—

During three and six months ended June 30, 2016 and 2015, no transfers were made between Level 1, Level 2 and Level 3 liabilities or investments.

Share-Based Compensation

Share-Based Compensation

We use the fair value based method of accounting for share-based compensation. We utilized the Black-Scholes option pricing model to measure the fair value of stock options and SARs on their grant dates in years prior to 2015. Restricted stock and RSUs were measured at their fair values.  During 2015, we issued options, SARs and RSUs with an additional market condition.  To fair value these awards, we utilized a Monte Carlo simulation.

The following table is a summary of compensation expense recorded in general and administrative expense in our consolidated condensed statements of operations and comprehensive loss by type of awards:

	Six Months Ended June 30,
Employee Stock-Based Compensation	2016		2015
	(in thousands)
Equity based awards:
Stock options	$	1,113	$	920
Restricted stock		68		68
RSUs		149		—
Total expense related to equity based awards		1,330		988
Liability based awards:
SARs		238		277
RSUs		346		226
Total expense related to liability based awards		584		503
Total compensation expense	$	1,914	$	1,491

The assumptions summarized in the following table were used to calculate the fair value of the SARs classified as Level 3 instruments that were outstanding as of the balance sheet date:

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Exercise price	Level 1 input	$	1.13
Threshold price	Level 1 input	$	2.50
Suboptimal exercise factor	Level 3 input		2.5
Term (years)	Level 1 input		4.06
Volatility	Level 2 input		110.0	%
Risk-free rate	Level 1 input		0.87	%
Dividend yield	Level 2 input		0.0	%

Income Taxes

Income Taxes

Deferred income taxes reflect the net tax effects, calculated at currently enacted rates, of (a) future deductible/taxable amounts attributable to events that have been recognized on a cumulative basis in the financial statements or income tax returns, and (b) operating loss and tax credit carryforwards. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized.

We classify interest related to income tax liabilities and penalties as applicable, as interest expense.  We recorded no penalties during the three and six months ended June 30, 2016 and 2015.

Since December 2013, we have provided deferred income taxes on undistributed earnings of our foreign subsidiaries where we are not able to assert that such earnings were permanently reinvested, or otherwise could be repatriated in a tax free manner, as part of our ongoing business.  As of December 31, 2015 and through the second quarter of 2016, the deferred tax liability provided on such earnings was zero due to the impairment of the underlying book investment in Petrodelta.

The 15% Note was issued, for income tax purposes, with original issue discount (“OID”).  OID generally is deductible for income tax purposes.  However, if the debt instrument constitutes an “applicable high-yield discount obligation” (“AHYDO”) within the meaning of IRC Section 163(i)(1), then a portion of the OID likely would be non-deductible pursuant to IRC Section 163(e)(5).  Our analysis of the 15% Note is that the note may be an AHYDO; consequently, a portion or all of the OID likely may be non-deductible for income tax purposes.

The Internal Revenue Service (“IRS”) audited the Company’s 2013 and 2014 tax years. The audit commenced in April 2016 and the IRS informed us that it will issue a no charge report.

Noncontrolling Interest Owners

Noncontrolling Interest Owners

Changes in noncontrolling interest owners were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	(1,920)	$	78,902	$	447	$	79,152
Contributions by noncontrolling interest owners		383		61		924		163
Net loss attributable to noncontrolling interest owners		(158)		(262)		(3,066)		(614)
Balance at end of period	$	(1,695)	$	78,701	$	(1,695)	$	78,701

New Accounting Pronouncements

New Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases”.  It is expected to be effective for periods beginning after December 15, 2018 for public entities.  Early application is permitted.  Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less.  All other leases will fall into one of two categories: (1) Financing leases, similar to capital leases, will require the recognition of an asset and liability, measured at the present value of the lease payments.  Interest on the liability will be recognized separately from amortization of the asset.  Principal repayments will be classified as financing outflows and payments of interest as operating outflows on the statement of cash flows.  (2) Operating leases will also require the recognition of an asset and liability measured at the present value of the lease payments.  A single lease cost, consisting of interest on the obligation and amortization of the asset, calculated such that the amortization of the asset will increase as the interest amount decreases resulting in a straight-line recognition of lease expense.  All cash outflows will be classified as operating on the statement of cash flows.  We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-06, “Derivatives and Hedging (Topic 815: Contingent Put and Call Options in Debt Instruments)”.  This amendment addresses how an entity should assess whether contingent call (put) options that can accelerate the payment of debt instruments that are clearly and closely related to the debt hosts.  This assessment is necessary to determine if the option(s) must be separately accounted for as a derivative.  The ASU clarifies that an entity is required to assess the embedded call (put) options solely in accordance with the specific four-step decision sequence. This means entities  are not also required to assess whether the contingency for exercising the option(s) is indexed to interest rates or credit risk. For example, when evaluating debt instruments puttable upon a change in control, the event triggering the change in control is not relevant to the assessment.  Only the resulting settlement of debt is subject to the four-step decision sequence.  The amendment is effective for public entities for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years.  Early adoption is permitted.  However, if an entity early adopts the amendment in an interim period, any adjustments should be reflected as of the beginning of that fiscal year.  We do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows.   

In March 2016, the FASB issued ASU No. 2016-07, “Investments — Equity Method and Joint Ventures (Topic 323)”. This amendment simplifies the accounting for equity method of investments, the amendment in the update eliminates the requirement in Topic 323 that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendment requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendment in this update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendment should be applied prospectively upon the effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted.  We are currently evaluating the impact of this guidance.

In March 2016, the FASB issued ASU No 2016-09, “Compensation — Stock Compensation (Topic 718)”.  It introduces targeted amendments intended to simplify the accounting for stock compensation.  Specifically the ASU requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement.  The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur.  An entity also should recognize excess tax benefits, and assesses the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period.  That is, off balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption.  Entities will no longer need to maintain and track an Additional Paid In Capital pool.  The ASU also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows.  The amendment is effective for public entities for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  Early adoption is permitted.  We are currently evaluating the impact of this guidance. 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The new guidance is related to the calculation of credit losses on financial instruments. All financial instruments not accounted for at fair value will be impacted, including our trade and partner receivables. Allowances are to be measured using a current expected credit loss model as of the reporting date which is based on historical experience, current conditions and reasonable and supportable forecasts. This is significantly different from the current model which increases the allowance when losses are probable. This change is effective for all public companies for fiscal years beginning after December 31, 2019, including interim periods within those fiscal years and will be applied with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We are currently evaluating the provisions of this guidance and are assessing its potential impact on our financial position, results of operations, cash flows and related disclosures.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2016

Summary of Significant Accounting Policies [Abstract]

Major Components of Property and Equipment

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)
Unproved property costs - Dussafu PSC	$	28,045	$	28,000
Oilfield inventories		2,878		3,006
Other administrative property		3,176		2,937
Total property and equipment		34,099		33,943
Accumulated depreciation		(2,533)		(2,482)
Total property and equipment, net	$	31,566	$	31,461

Schedule of Fair Value Hierarchy of Financial Assets and Liabilities

	As of June 30, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Recurring
Assets:
Embedded derivative asset - 15% Note	$	—	$	—	$	6,697	$	6,697
Embedded derivative asset - Additional Draw Note		—		—		447		447
	$	—	$	—	$	7,144	$	7,144
Liabilities:
SARs liability	$	—	$	93	$	241	$	334
RSUs liability		—		520		—		520
Warrant derivative liability		—		—		16,417		16,417
	$	—	$	613	$	16,658	$	17,271

	As of December 31, 2015
	Level 1		Level 2		Level 3		Total
	(in thousands)
Non recurring
Assets:
Dussafu PSC	$	—	$	—	$	28,000	$	28,000
	$	—	$	—	$	28,000	$	28,000
Recurring
Assets:
Embedded derivative asset	$	—	$	—	$	5,010	$	5,010
	$	—	$	—	$	5,010	$	5,010
Liabilities:
SARs liability	$	—	$	46	$	50	$	96
RSUs liability		—		174		—		174
Warrant derivative liability		—		—		5,503		5,503
	$	—	$	220	$	5,553	$	5,773

Reconciliation of Financial Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial assets -  embedded derivative asset:
Beginning balance	$	5,001	$	—	$	5,010	$	—
Additions		447		2,504		447		2,504
Change in fair value		1,696		123		1,687		123
Ending balance	$	7,144	$	2,627	$	7,144	$	2,627

Reconciliation of Financial Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  embedded derivative liability:
Beginning balance	$	—	$	—	$	—	$	—
Additions - fair value at issuance		—		13,449		—		13,449
Change in fair value		—		(434)		—		(434)
Ending balance	$	—	$	13,015	$	—	$	13,015

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  warrant derivative liability:
Beginning balance	$	9,564	$	—	$	5,503	$	—
Additions		—		40,013		—		40,013
Change in fair value		6,853		(2,418)		10,914		(2,418)
Ending balance	$	16,417	$	37,595	$	16,417	$	37,595

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Financial liabilities -  stock appreciation rights
Beginning balance	$	120	$	—	$	50	$	—
Change in fair value		121		—		191		—
Ending balance	$	241	$	—	$	241	$	—

Summary of Compensation Expense

	Six Months Ended June 30,
Employee Stock-Based Compensation	2016		2015
	(in thousands)
Equity based awards:
Stock options	$	1,113	$	920
Restricted stock		68		68
RSUs		149		—
Total expense related to equity based awards		1,330		988
Liability based awards:
SARs		238		277
RSUs		346		226
Total expense related to liability based awards		584		503
Total compensation expense	$	1,914	$	1,491

Schedule of Fair Value of SARs Classified as Level 3

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Exercise price	Level 1 input	$	1.13
Threshold price	Level 1 input	$	2.50
Suboptimal exercise factor	Level 3 input		2.5
Term (years)	Level 1 input		4.06
Volatility	Level 2 input		110.0	%
Risk-free rate	Level 1 input		0.87	%
Dividend yield	Level 2 input		0.0	%

Schedule of Changes in Noncontrolling Interest Owners

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Balance at beginning of period	$	(1,920)	$	78,902	$	447	$	79,152
Contributions by noncontrolling interest owners		383		61		924		163
Net loss attributable to noncontrolling interest owners		(158)		(262)		(3,066)		(614)
Balance at end of period	$	(1,695)	$	78,701	$	(1,695)	$	78,701

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

		Three Months Ended June 30,			Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)				(in thousands)
Loss from continuing operations(a)	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)
Net loss attributable to Harvest	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)
Weighted average common shares outstanding		51,415		42,663		51,415		42,663
Weighted average common shares, diluted		51,415		42,663		51,415		42,663
Loss per share:
Basic loss per share(a)	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)
Diluted loss per share(a)	$	(0.25)	$	(0.60)	$	(0.53)	$	(0.73)

a) Net of net loss attributable to noncontrolling interests.

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Debt and Financing (Tables)

6 Months Ended

Jun. 30, 2016

Debt and Financing [Abstract]

Schedule of Long-Term Debt Due to Related Party, Net of Discount

	As of June 30,
Long-Term Debt	2016
	(in thousands)
Beginning balance - January 1, 2016	$	214
Increase in  long-term debt due to the capitalization of accrued interest		1,736
Additional borrowings under the 15% Note		3,000
Additional Draw Note borrowing		2,000
Additional Draw Note - premium		447
Accretion of discount on debt		427
	$	7,824

Schedule of Fair Value of Derivative Asset

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Weighted Term (years)			3.97
Yield Volatility	Level 2 input		40	%
Risk-free rate	Level 1 input		0.9% to 1.1	%
Dividend yield	Level 2 input		0.0	%
Scenario probability:
Claim Date extended with Stock Appreciation Date threshold met	Level 3 input		59.4	%
Claim Date extended with Stock Appreciation Date threshold not met	Level 3 input		36.8	%
Claim Date not extended with Stock Appreciation Date threshold met	Level 3 input		59.4	%
Claim Date not extended with Stock Appreciation Date threshold not met	Level 3 input		34.2	%
Scenario probability (future draws/no future draws)	Level 3 input		70%/30	%

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Warrant Derivative Liability (Tables)

6 Months Ended

Jun. 30, 2016

Warrant Derivative Liability [Abstract]

Schedule of Fair Value of Warrant Derivative Liability

	Fair Value
	Hierarchy	As of June 30,
	Level	2016
Significant assumptions (or ranges):
Stock price	Level 1 input	$	0.84
Exercise price	Level 1 input	$	1.25
Stock appreciation date price (hurdle)	Level 1 input	$	2.50
Term (warrants)			1.9681
Term (Claim Date)			0.0519
Term (Claim Date extended)			0.4699
Volatility	Level 2 input		135.0	%
Risk-free rate (warrants)	Level 1 input		0.63	%
Risk-free rate (Claim Date)	Level 1 input		0.37	%
Risk-free rate (Claim Date extended)	Level 1 input		0.41	%
Dividend yield	Level 2 input		0.0	%

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Operating Segments (Tables)

6 Months Ended

Jun. 30, 2016

Operating Segments [Abstract]

Schedule of Segment Loss Attributable to Harvest

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Segment Loss Attributable to Harvest
Venezuela	$	(258)	$	(85)	$	(2,820)	$	(108)
Gabon		(213)		(934)		(1,023)		(2,848)
Indonesia		—		(2)		—		(55)
United States and other		(12,427)		(24,404)		(23,151)		(28,031)
Net loss attributable to Harvest (a)	$	(12,898)	$	(25,425)	$	(26,994)	$	(31,042)

a) Net of net loss attributable to noncontrolling interest owners.

Schedule of Operating Segment Assets

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)
Operating Segment Assets
Venezuela	$	115	$	5,290
Gabon		31,259		32,710
Indonesia		—		5
United States and other		11,060		9,776
Total assets	$	42,434	$	47,781

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Organization (Details)		6 Months Ended
	Jul. 19, 2016 USD ($)	Jun. 30, 2016 USD ($) property $ / shares shares	Jun. 30, 2015 USD ($)	Sep. 19, 2016 USD ($)	Aug. 19, 2016 USD ($)	Jul. 01, 2016 USD ($)	Apr. 01, 2016 USD ($)	Jan. 04, 2016 USD ($)	Dec. 31, 2015 USD ($)	Jun. 19, 2015 USD ($)
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Gross proceeds from sale of securities		$ 5,000,000	$ 33,500,000
Accrued interest		1,084,000							$ 954,000
Reserve for note receivable		$ 5,160,000
CT Energy [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		16.80%
Gross proceeds from sale of securities			$ 32,200,000
Cash consideration		$ 80,000,000
Termination fee		$ 4,600,000
Harvest Holding [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		51.00%
Harvest Holding [Member] | Vinccler [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership interest held by noncontrolling interest owners		20.00%
Harvest Holding [Member] | Petroandina [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership interest held by noncontrolling interest owners		29.00%
HNR Finance [Member] | Harvest Holding [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		100.00%
Petrodelta [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		40.00%
Number of oil fields | property		6
Indirect ownership percentage		20.40%
Petrodelta [Member] | HNR Finance [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		40.00%
Petrodelta [Member] | CVP [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		56.00%
Petrodelta [Member] | PDVSA [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		4.00%
CVP And PDVSA [Member] | PDVSA [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		100.00%
Harvest Vinccler [Member] | CT Energy [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage		51.00%
Senior Note [Member] | CT Energy [Member] | 15% Note [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Issuance date		Jun. 19, 2015
Gross proceeds from sale of securities		$ 3,000,000
Promissory note		$ 30,000,000					$ 27,000,000	$ 26,100,000		$ 25,200,000
Debt term		5 years
Interest rate		15.00%
Commencement date of quarterly interest payment		Oct. 01, 2015
Threshold price per share | $ / shares		$ 2.50
Cancellation of debt		$ 30,000,000
Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Issuance date		Jun. 19, 2015
Gross proceeds from sale of securities		$ 2,000,000
Debt term		5 years
Interest rate		15.00%
Commencement date of quarterly interest payment		Oct. 01, 2016
Threshold price per share | $ / shares		$ 2.50
Potential additional periodic borrowing availability		$ 2,000,000
Period additional draw may be utilized		6 months
Period after transaction additional funds become available		1 year
Potential additional borrowing availability		$ 12,000,000
Convertible Senior Note [Member] | 9% Note [Member] | CT Energy [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Issuance date		Jun. 19, 2015
Debt term		5 years
Convertible senior secured note		$ 7,000,000
Interest rate		9.00%
Accrued interest		$ 100,000
Common stock converted from convertible senior secured note | shares		8,667,597
Conversion price per share | $ / shares		$ 0.82
Percentage of outstanding shares		16.80%
Irrevocable Standby Letter Of Credit [Member] | CT Energy [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Face amount		$ 15,000,000
Warrants [Member] | CT Energy [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Shares issuable upon warrant conversion | shares		34,070,820
Warrant exercise price per share | $ / shares		$ 1.25
Threshold price per share | $ / shares		$ 2.50
Note Receivable [Member] | 11% Note [Member] | CT Energy [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Debt term		6 months
Interest rate		11.00%
Promissory note		$ 12,000,000
Note Receivable [Member] | CT Energia Note [Member] | CT Energia [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Issuance date		Jan. 04, 2016
Commencement date of quarterly interest payment		Jul. 01, 2016
Interest rate		11.00%
Promissory note		$ 5,200,000
Maturity date		Jan. 04, 2019
Interest payments		$ 0
Aggregate amount of capital contributions		$ 2,600,000
Trigger Price Not Met [Member] | Senior Note [Member] | CT Energy [Member] | 15% Note [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Interest rate		8.00%
Trigger Price Not Met [Member] | Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Interest rate		8.00%
Forecast [Member] | Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Promissory note				$ 8,000,000	$ 6,000,000
Subsequent Event [Member] | Senior Note [Member] | CT Energy [Member] | 15% Note [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Promissory note						$ 30,900,000
Subsequent Event [Member] | Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Gross proceeds from sale of securities	$ 2,000,000
Promissory note	$ 4,000,000

XML

Liquidity (Details) - USD ($)		6 Months Ended
	Jul. 19, 2016	Jun. 30, 2016	Jun. 30, 2015	Sep. 19, 2016	Aug. 19, 2016	Jul. 01, 2016	Apr. 01, 2016	Jan. 04, 2016	Jun. 19, 2015
Debt Instrument [Line Items]
Additional borrowings		$ 5,000,000	$ 33,500,000
Capitalized interest payments		$ 1,736,000
CT Energy [Member]
Debt Instrument [Line Items]
Additional borrowings			$ 32,200,000
CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Interest rate		15.00%
Additional borrowings		$ 3,000,000
Promissory note		$ 30,000,000					$ 27,000,000	$ 26,100,000	$ 25,200,000
CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Interest rate		15.00%
Additional borrowings		$ 2,000,000
CT Energy [Member] | Forecast [Member] | Additional Draw Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Promissory note				$ 8,000,000	$ 6,000,000
Subsequent Event [Member] | CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Promissory note						$ 30,900,000
Subsequent Event [Member] | CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Additional borrowings	$ 2,000,000
Promissory note	$ 4,000,000

XML

Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Summary Of Significant Accounting Policies [Line Items]
Depreciation expense	$ 14	$ 27	$ 40	$ 56
Allowance for doubtful accounts	700		700		$ 700
Receivable from joint venture partners					400
Capitalized interest costs	0	0	0	0
Income tax penalties	0	$ 0	0	$ 0
Deferred tax liability on undistributed earnings of foreign subsidiaries	0		0		0
CT Energy [Member]
Summary Of Significant Accounting Policies [Line Items]
Reserve for payment	4,600		4,600
Stock Appreciation Rights [Member]
Summary Of Significant Accounting Policies [Line Items]
Obligations	334		334		96
Restricted Stock Units [Member]
Summary Of Significant Accounting Policies [Line Items]
Obligations	$ 520		520		174
Dussafu PSC [Member]
Summary Of Significant Accounting Policies [Line Items]
Reserve for payment					1,100
Impairment of oil and natural gas property			$ 0		23,200
Furniture, Fixtures and Equipment [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives			3 years
Furniture, Fixtures and Equipment [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives			5 years
Senior Note [Member] | 15% Note [Member] | CT Energy [Member]
Summary Of Significant Accounting Policies [Line Items]
Interest rate	15.00%		15.00%
Petrodelta [Member]
Summary Of Significant Accounting Policies [Line Items]
Impairment of investment in affiliate					$ 164,700

XML

Summary of Significant Accounting Policies (Major Components of Property and Equipment) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Summary of Significant Accounting Policies [Abstract]
Unproved property costs - Dussafu PSC	$ 28,045	$ 28,000
Oilfield inventories	2,878	3,006
Other administrative property	3,176	2,937
Total property and equipment	34,099	33,943
Accumulated depreciation	(2,533)	(2,482)
TOTAL PROPERTY AND EQUIPMENT, net	$ 31,566	$ 31,461

XML

Summary of Significant Accounting Policies (Schedule of Fair Value Hierarchy of Financial Assets and Liabilities) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Dussafu PSC	$ 28,045	$ 28,000
Assets, fair value		28,000
Derivative assets	7,144	5,010
Assets, fair value	7,144	5,010
Derivative liabilities	16,417	5,503
Liabilities, fair value	17,271	5,773
Stock Appreciation Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Obligations	334	96
Restricted Stock Units [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Obligations	520	174
Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	16,417	5,503
Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets		5,010
Level 1 [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Dussafu PSC
Assets, fair value
Level 1 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value
Liabilities, fair value
Level 1 [Member] | Recurring [Member] | Stock Appreciation Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Obligations
Level 1 [Member] | Recurring [Member] | Restricted Stock Units [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Obligations
Level 1 [Member] | Recurring [Member] | Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities
Level 1 [Member] | Recurring [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets
Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value	613	220
Level 2 [Member] | Recurring [Member] | Stock Appreciation Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Obligations	93	46
Level 2 [Member] | Recurring [Member] | Restricted Stock Units [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Obligations	520	174
Level 3 [Member] | Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Dussafu PSC		28,000
Assets, fair value		28,000
Level 3 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value	7,144	5,010
Liabilities, fair value	16,658	5,553
Level 3 [Member] | Recurring [Member] | Stock Appreciation Rights [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Obligations	241	50
Level 3 [Member] | Recurring [Member] | Warrants [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liabilities	16,417	5,503
Level 3 [Member] | Recurring [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets		$ 5,010
Senior Note [Member] | CT Energy [Member] | 15% Note [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	6,697
Senior Note [Member] | CT Energy [Member] | 15% Note [Member] | Level 1 [Member] | Recurring [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets
Senior Note [Member] | CT Energy [Member] | 15% Note [Member] | Level 3 [Member] | Recurring [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	6,697
Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	447
Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member] | Level 1 [Member] | Recurring [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets
Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member] | Level 3 [Member] | Recurring [Member] | Embedded Derivative Assets [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	$ 447

XML

Summary of Significant Accounting Policies (Reconciliation of Financial Assets Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)) (Details) - Embedded Derivative Assets [Member] - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	$ 5,001		$ 5,010
Additions	447	2,504	447	2,504
Change in fair value	1,696	123	1,687	123
Ending balance	$ 7,144	$ 2,627	$ 7,144	$ 2,627

XML

Summary of Significant Accounting Policies (Reconciliation of Financial Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Embedded Derivative Liabilities [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance
Additions		13,449		13,449
Change in fair value		(434)		(434)
Ending balance		13,015		13,015
Warrants [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	9,564		5,503
Additions		40,013		40,013
Change in fair value	6,853	(2,418)	10,914	(2,418)
Ending balance	16,417	37,595	16,417	37,595
Stock Appreciation Rights [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	120		50
Change in fair value	121		191
Ending balance	$ 241		$ 241

XML

Summary of Significant Accounting Policies (Summary of Compensation Expense) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total expense related to equity based awards	$ 1,330	$ 988
Total expense related to liability based awards	584	503
Total compensation expense	1,914	1,491
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total expense related to equity based awards	1,113	920
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total expense related to equity based awards	68	68
Stock Appreciation Rights [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total expense related to liability based awards	238	277
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total expense related to equity based awards	149
Total expense related to liability based awards	$ 346	$ 226

XML

Summary of Significant Accounting Policies (Schedule of Fair Value of SARs Classified as Level 3) (Details) - Stock Appreciation Rights [Member] - Recurring [Member]	6 Months Ended
	Jun. 30, 2016 $ / shares
Level 1 [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Exercise price	$ 1.13
Threshold price	$ 2.50
Term (years)	4 years 22 days
Rik-free rate	0.87%
Level 2 [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Volatility	110.00%
Dividend yield	0.00%
Level 3 [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Suboptimal exercise factor	2.5

XML

Summary of Significant Accounting Policies (Schedule of Changes in Noncontrolling Interest Owners) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Summary of Significant Accounting Policies [Abstract]
Balance at beginning of period	$ (1,920)	$ 78,902	$ 447	$ 79,152
Contributions by noncontrolling interest owners	383	61	924	163
Net loss attributable to noncontrolling interest owners	(158)	(262)	(3,066)	(614)
Balance at end of period	$ (1,695)	$ 78,701	$ (1,695)	$ 78,701

XML

Earnings Per Share (Narrative) (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	6.7	3.7	6.9	4.0
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share	34.1	36.9	34.1	36.9

XML

Earnings Per Share (Schedule of Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net loss attributable to Harvest	[1],[2]	$ (12,898)	$ (25,425)	$ (26,994)	$ (31,042)
Weighted average common shares outstanding		51,415	42,663	51,415	42,663
Weighted average common shares, diluted		51,415	42,663	51,415	42,663
Basic loss per share	[2]	$ (0.25)	$ (0.60)	$ (0.53)	$ (0.73)
Diluted loss per share	[2]	$ (0.25)	$ (0.60)	$ (0.53)	$ (0.73)

[1] Net of net loss attributable to noncontrolling interest owners.

[2] Net of net loss attributable to noncontrolling interests.

XML

Investment in Affiliate (Details) - Petrodelta [Member] - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage	40.00%
Carrying value of investment

XML

Venezuela - Other (Details) - Harvest Vinccler [Member] $ in Thousands, VEF in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) VEF / $	Jun. 30, 2015 USD ($) VEF / $	Jun. 30, 2016 USD ($) VEF / $	Jun. 30, 2015 USD ($) VEF / $	Jun. 30, 2016 VEF	Jun. 30, 2016 USD ($)
Amount exchanged | $	$ 100	$ 80	$ 100	$ 80
Foreign currency average exchange rate | VEF / $	486.84	199.80	397.74	199.80
Assets account, balance					VEF 18.1	$ 40
Liabilities account, balance					VEF 31.5	$ 60

XML

Gabon (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2016 USD ($) a item ft	Dec. 31, 2015 USD ($)
Capitalized Costs Of Unproved Properties Excluded From Amortization [Line Items]
Impairment of oilfied inventory	$ 128
Oilfield inventories	2,878	$ 3,006
Unproved oil and natural gas properties	$ 30,924	31,006
Dussafu PSC [Member]
Capitalized Costs Of Unproved Properties Excluded From Amortization [Line Items]
Ownership percentage	66.667%
Area covered by acquiree entity | a	680,000
Area covered bv acquiree entity under water depths | ft	1,650
Number of discoveries | item	4
Term from approval date to begin production	4 years
Impairment of oil and natural gas property	$ 0	$ 23,200

XML

Debt and Financing (Narrative) (Details) - USD ($)					3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 19, 2016	Jul. 01, 2016	Apr. 01, 2016	Jan. 04, 2016	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015	Sep. 19, 2016	Aug. 19, 2016	Jun. 19, 2015
Debt Instrument [Line Items]
Financing fees								$ 1,245,000
Accretion of discount on debt							$ 427,000	145,000
Additional borrowings							5,000,000	33,500,000
Fair value of embedded derivative asset					$ 7,144,000		7,144,000		$ 5,010,000
Change in fair value of embedded derivative assets and liabilities					1,696,000	$ 557,000	1,687,000	557,000
Embedded Derivative Liabilities [Member]
Debt Instrument [Line Items]
Fair value of derivative liabilities at issuance						13,449,000		13,449,000
Warrants [Member]
Debt Instrument [Line Items]
Fair value of derivative liabilities at issuance						40,013,000		40,013,000
Recurring [Member] | Warrants [Member]
Debt Instrument [Line Items]
Term (years)							1 month 29 days
CT Energy [Member]
Debt Instrument [Line Items]
Proceeds from debt, net of financing fees							$ 30,600,000
Financing fees							1,600,000
Additional borrowings								32,200,000
Cash consideration							$ 80,000,000
CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Issuance date							Jun. 19, 2015
Interest rate					15.00%		15.00%
Promissory note			$ 27,000,000	$ 26,100,000	$ 30,000,000		$ 30,000,000					$ 25,200,000
Unamortized discount					24,600,000		24,600,000		25,000,000
Interest expense					1,400,000		2,500,000
Interest expense related to stated rate of interest					1,100,000		2,100,000
Accretion of discount on debt					$ 300,000
Additional borrowings							$ 3,000,000
Debt term							5 years
Commencement date of quarterly interest payment							Oct. 01, 2015
Threshold price per share							$ 2.50
Addition default interest rate							2.00%
Interest payment converted into additional principal			$ 1,000,000	$ 1,000,000
Cancellation of debt							$ 30,000,000
Make whole price, as percentage of principal							100.00%
Debt covenant, period after date of determination for measurement							2 years
Variable spread on reference rate							50.00%
Holders of principal needed to declare debt immediatele due, percent							25.00%
CT Energy [Member] | 15% Note [Member] | Senior Note [Member] | Trigger Price Not Met [Member]
Debt Instrument [Line Items]
Interest rate					8.00%		8.00%
Debt extension term							2 years
CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Issuance date							Jun. 19, 2015
Interest rate					15.00%		15.00%
Additional borrowings							$ 2,000,000
Debt term							5 years
Commencement date of quarterly interest payment							Oct. 01, 2016
Threshold price per share							$ 2.50
Addition default interest rate							2.00%
Holders of principal needed to declare debt immediatele due, percent							25.00%
Potential additional periodic borrowing availability							$ 2,000,000
Period additional draw may be utilized							6 months
Period after transaction additional funds become available							1 year
Potential additional borrowing availability							$ 12,000,000
CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member] | Trigger Price Not Met [Member]
Debt Instrument [Line Items]
Interest rate					8.00%		8.00%
Debt extension term							2 years
CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member] | Forecast [Member]
Debt Instrument [Line Items]
Promissory note										$ 8,000,000	$ 6,000,000
Embedded Derivative Assets [Member]
Debt Instrument [Line Items]
Fair value of embedded derivative assets at issuance					$ 447,000	$ 2,504,000	$ 447,000	$ 2,504,000
Fair value of embedded derivative asset									5,010,000
Embedded Derivative Assets [Member] | Recurring [Member]
Debt Instrument [Line Items]
Term (years)							3 years 11 months 19 days
Embedded Derivative Assets [Member] | Recurring [Member] | Level 3 [Member]
Debt Instrument [Line Items]
Fair value of embedded derivative asset									$ 5,010,000
Embedded Derivative Assets [Member] | Recurring [Member] | Level 3 [Member] | Future Draws [Member]
Debt Instrument [Line Items]
Scenario probability							70.00%		50.00%
Embedded Derivative Assets [Member] | Recurring [Member] | Level 3 [Member] | No Future Draws [Member]
Debt Instrument [Line Items]
Scenario probability							30.00%		50.00%
Embedded Derivative Assets [Member] | CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Fair value of embedded derivative asset					6,697,000		$ 6,697,000
Embedded Derivative Assets [Member] | CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Fair value of embedded derivative asset					447,000		447,000
Change in fair value of embedded derivative assets and liabilities					0		0
Embedded Derivative Assets [Member] | CT Energy [Member] | Recurring [Member] | Level 3 [Member] | 15% Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Fair value of embedded derivative asset					6,697,000		6,697,000
Embedded Derivative Assets [Member] | CT Energy [Member] | Recurring [Member] | Level 3 [Member] | Additional Draw Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Fair value of embedded derivative asset					447,000		447,000
Fair Value [Member] | CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Fair value of note payable					$ 9,000,000		$ 9,000,000
Subsequent Event [Member] | CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Promissory note		$ 30,900,000
Interest payment converted into additional principal		$ 1,100,000
Subsequent Event [Member] | CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member]
Debt Instrument [Line Items]
Promissory note	$ 4,000,000
Additional borrowings	$ 2,000,000
9% Note [Member] | CT Energy [Member] | Convertible Senior Note [Member]
Debt Instrument [Line Items]
Issuance date							Jun. 19, 2015
Interest rate							9.00%
Debt term							5 years

XML

Debt and Financing (Schedule of Long-Term Debt Due to Related Party, Net of Discount) (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016	Jun. 30, 2015
Debt Instrument [Line Items]
Beginning balance		$ 214
Increase in long-term debt due to the capitalization of accrued interest		1,736
Additional borrowings		5,000	$ 33,500
Additional Draw Note - premium		447
Accretion of discount on debt		427	145
Ending balance	$ 7,824	7,824
CT Energy [Member]
Debt Instrument [Line Items]
Additional borrowings			$ 32,200
Senior Note [Member] | CT Energy [Member] | 15% Note [Member]
Debt Instrument [Line Items]
Additional borrowings		3,000
Accretion of discount on debt	$ 300
Senior Note [Member] | CT Energy [Member] | Additional Draw Note [Member]
Debt Instrument [Line Items]
Additional borrowings		$ 2,000

XML

Debt and Financing (Schedule of Fair Value of Derivative Asset) (Details) - Embedded Derivative Assets [Member] - Recurring [Member]	6 Months Ended	12 Months Ended
	Jun. 30, 2016	Dec. 31, 2015
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Weighted Term (years)	3 years 11 months 19 days
Level 1 [Member] | Minimum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Risk-free rate	0.90%
Level 1 [Member] | Maximum [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Risk-free rate	1.10%
Level 2 [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Yield Volatility	40.00%
Dividend yield	0.00%
Level 3 [Member] | Claim Date Extended With Stock Appreciation Date Threshold Met [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Scenario probability	59.40%
Level 3 [Member] | Claim Date Extended With Stock Appreciation Date Threshold Not Met [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Scenario probability	36.80%
Level 3 [Member] | Claim Date Not Extended With Stock Appreciation Date Threshold Met [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Scenario probability	59.40%
Level 3 [Member] | Claim Date Not Extended With Stock Appreciation Date Threshold Not Met [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Scenario probability	34.20%
Level 3 [Member] | Future Draws [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Scenario probability	70.00%	50.00%
Level 3 [Member] | No Future Draws [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Scenario probability	30.00%	50.00%

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Warrant Derivative Liability (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Class Of Warrant Or Right [Line Items]
Fair value of CT Warrant	$ 16,417		$ 16,417		$ 5,503
Change in fair value of warrant derivative liability	$ (6,853)	$ 2,418	$ (10,914)	$ 2,418
CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Class Of Warrant Or Right [Line Items]
Threshold price per share			$ 2.50
Interest rate	15.00%		15.00%
Warrants [Member] | CT Energy [Member]
Class Of Warrant Or Right [Line Items]
Shares issuable upon warrant conversion	34,070,820		34,070,820
Initial exercise price per share	$ 1.25		$ 1.25
Threshold price per share			$ 2.50
Consecutive trading days			21 days

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Warrant Derivative Liability (Schedule of Fair Value of Warrant Derivative Liability) (Details) - Warrants [Member] - Recurring [Member]	6 Months Ended
	Jun. 30, 2016 $ / shares
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Term (years)	1 month 29 days
Claim Date [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Term (years)	2 days
Claim Date Extended [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Term (years)	14 days
Level 1 [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Stock price	$ 0.84
Exercise price	1.25
Stock appreciation date price (hurdle)	$ 2.50
Risk-free rate	0.63%
Level 1 [Member] | Claim Date [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Risk-free rate	0.37%
Level 1 [Member] | Claim Date Extended [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Risk-free rate	0.41%
Level 2 [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Volatility	135.00%
Dividend yield	0.00%

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Commitments and Contingencies (Details) $ in Thousands			1 Months Ended							6 Months Ended
	Jan. 26, 2015 USD ($)	May 31, 2011 USD ($)	Jul. 31, 2007 claim	Jun. 30, 2007 claim	Mar. 31, 2007 claim	Aug. 31, 2006 claim	Jul. 31, 2006 claim	Apr. 30, 2005 claim	Jul. 31, 2004 claim	Jun. 30, 2016 USD ($) claim	Dec. 31, 2015 USD ($)	Mar. 21, 2011 agreement
Loss Contingencies [Line Items]
Allowance for doubtful accounts										$ 700	$ 700
Receivable from joint venture partners											400
Dussafu PSC [Member]
Loss Contingencies [Line Items]
Contractual commitments										$ 4,500
Production commencement term following date of grant										4 years
Contractual obligations										$ 100	300
Estimated loss		$ 1,100
Blocked payment net to interest		$ 700
Percentage of cost sharing interest in work commitments		66.667%
Petrodelta [Member]
Loss Contingencies [Line Items]
Ownership percentage										40.00%
Harvest Holding [Member]
Loss Contingencies [Line Items]
Ownership percentage										51.00%
Venezuela [Member] | Petrodelta [Member]
Loss Contingencies [Line Items]
Ownership percentage										60.00%
Uracoa Municipality Tax Assessments [Member]
Loss Contingencies [Line Items]
Number of claims filed | claim					2	2	2		3	9
Libertador Municipality Tax Assessments [Member]
Loss Contingencies [Line Items]
Number of claims filed | claim			2	2				1		5
Newfield [Member]
Loss Contingencies [Line Items]
Number of Purchase and Sale Agreements | agreement												2
Joint Partners [Member] | Dussafu PSC [Member]
Loss Contingencies [Line Items]
Contractual obligations										$ 36	$ 100
HNR Energia [Member]
Loss Contingencies [Line Items]
Contingency, escrow deposit requirement	$ 5,000
Petroandina [Member] | Harvest Holding [Member]
Loss Contingencies [Line Items]
Ownership interest held by noncontrolling interest owners										29.00%

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Operating Segments (Schedule of Segment Loss Attributable to Harvest) (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net loss attributable to Harvest	[1],[2]	$ (12,898)	$ (25,425)	$ (26,994)	$ (31,042)
Operating Segments [Member] | Venezuela [Member]
Net loss attributable to Harvest		(258)	(85)	(2,820)	(108)
Operating Segments [Member] | Gabon [Member]
Net loss attributable to Harvest		(213)	(934)	(1,023)	(2,848)
Operating Segments [Member] | Indonesia [Member]
Net loss attributable to Harvest			(2)		(55)
Operating Segments [Member] | United States and Other [Member]
Net loss attributable to Harvest		$ (12,427)	$ (24,404)	$ (23,151)	$ (28,031)

[1] Net of net loss attributable to noncontrolling interest owners.

[2] Net of net loss attributable to noncontrolling interests.

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Operating Segments (Schedule of Operating Segment Assets) (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Total assets	$ 42,434	$ 47,781
Operating Segments [Member] | Venezuela [Member]
Total assets	115	5,290
Operating Segments [Member] | Gabon [Member]
Total assets	31,259	32,710
Operating Segments [Member] | Indonesia [Member]
Total assets		5
Operating Segments [Member] | United States and Other [Member]
Total assets	$ 11,060	$ 9,776

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Related Party Transactions (Details) - USD ($)				6 Months Ended
	Jul. 19, 2016	Apr. 01, 2016	Jan. 04, 2016	Jun. 30, 2016	Jun. 30, 2015	Jul. 01, 2016	Jun. 19, 2015
Related Party Transaction [Line Items]
Additional borrowings				$ 5,000,000	$ 33,500,000
Reserve for note receivable				$ 5,160,000
Harvest Holding [Member]
Related Party Transaction [Line Items]
Ownership percentage				51.00%
Harvest Holding [Member] | Vinccler [Member]
Related Party Transaction [Line Items]
Ownership interest held by noncontrolling interest owners				20.00%
Harvest Holding [Member] | Petroandina [Member]
Related Party Transaction [Line Items]
Ownership interest held by noncontrolling interest owners				29.00%
Petrodelta [Member]
Related Party Transaction [Line Items]
Ownership percentage				40.00%
Petrodelta [Member] | HNR Finance [Member]
Related Party Transaction [Line Items]
Ownership percentage				40.00%
CT Energy [Member]
Related Party Transaction [Line Items]
Additional borrowings					$ 32,200,000
Ownership percentage				16.80%
CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Related Party Transaction [Line Items]
Interest rate				15.00%
Withholding tax		$ (100,000)	$ (100,000)
Additional borrowings				$ 3,000,000
Promissory note		$ 27,000,000	$ 26,100,000	$ 30,000,000			$ 25,200,000
Issuance date				Jun. 19, 2015
Commencement date of quarterly interest payment				Oct. 01, 2015
CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member]
Related Party Transaction [Line Items]
Interest rate				15.00%
Additional borrowings				$ 2,000,000
Issuance date				Jun. 19, 2015
Commencement date of quarterly interest payment				Oct. 01, 2016
Potential additional periodic borrowing availability				$ 2,000,000
Period additional draw may be utilized				6 months
CT Energia Note [Member] | Note Receivable [Member] | CT Energia [Member]
Related Party Transaction [Line Items]
Issuance date				Jan. 04, 2016
Promissory note				$ 5,200,000
Interest rate				11.00%
Commencement date of quarterly interest payment				Jul. 01, 2016
Maturity date				Jan. 04, 2019
Interest payments				$ 0
Aggregate amount of capital contributions				$ 2,600,000
Subsequent Event [Member] | CT Energy [Member] | 15% Note [Member] | Senior Note [Member]
Related Party Transaction [Line Items]
Promissory note						$ 30,900,000
Subsequent Event [Member] | CT Energy [Member] | Additional Draw Note [Member] | Senior Note [Member]
Related Party Transaction [Line Items]
Additional borrowings	$ 2,000,000
Promissory note	$ 4,000,000