Harvest Natural Resources, Inc. (Form: 8-K)

HARVEST NATURAL RESOURCES ANNOUNCES
FOURTH QUARTER AND 2006 RESULTS
• Mixed Company Conversion Continues to Affect Venezuela Financial Reporting
• Shareholders Approve Conversion
• 2006 Operating Advances Reimbursed by PDVSA

HOUSTON, Texas (March 13, 2007) – Harvest Natural Resources, Inc. (NYSE: HNR) today announced a 2006 fourth quarter loss of $8.6 million, or $0.23 per diluted share, compared with net income of $10.5 million, or $0.27 per diluted share, for the 2005 fourth quarter.

Like the second and third quarters, the Company did not recognize the equity earnings for its producing operations in Venezuela for the fourth quarter. The equity earnings for the three quarters starting April 1, 2006 will be reported upon completion of the conversion to the mixed company (Petrodelta).

The Company had a loss of $58.6 million, or $1.57 per diluted share, for the twelve months ended December 31, 2006 compared with earnings of $50.8 million, or $1.32 per diluted share, for 2005. The loss for 2006 is due to the inability to recognize equity earnings for the producing operations in Venezuela beginning with the second quarter and charges of $73.8 million, or $59.0 million net to the Company’s 80 percent interest, for additional taxes and related interest in Venezuela for 2001 through 2006.

Harvest Vinccler, S.C.A. (HVSCA), the Company’s 80 percent owned affiliate, has resolved and substantially paid all of the tax claims made by the SENIAT, the Venezuelan income tax authority. The additional taxes were primarily due to the SENIAT’s retroactive tax rate increase for 2001 through 2004. Resolution of the tax claims was a necessary step in the transition of HVSCA’s operations to Petrodelta.

Harvest President and Chief Executive Officer, James A. Edmiston, said, “During the fourth quarter, we received approval from our shareholders to execute the conversion contract, cancel our operating services agreement and transfer all of our tangible assets, contracts and rights related to the South Monagas Unit (SMU) fields in Venezuela to Petrodelta after receiving government approvals. In addition, Petrodelta would operate the Isleño, Temblador and El Salto fields upon their award by the Venezuelan government. The conversion contract is expected to be signed and Petrodelta is expected to be formed after receipt of Venezuelan government approvals. The Company will own a 32 percent net interest in Petrodelta.”

Edmiston continued, “Although we made progress towards the completion of the conversion during 2006, the complexity of the issues involved has increased the amount of time we and the Venezuelan government believed would be needed to complete the process. However, a number of other companies have now signed their conversion contracts and formed their mixed companies. Moreover, we understand three companies have completed the entire conversion process and are now ready to invoice PDVSA for the oil and gas delivered since April 1, 2006. With the precedents established and issues resolved by the companies more advanced in the conversion process, we expect to be able to expedite the conversion process and issuance of invoices for payment once we receive the government approvals.”

HVSCA continues to operate the SMU fields in Venezuela and advanced $36.3 million to fund operations for the last three quarters of 2006 of which $21.2 million, representing the second and third quarter advances, have been reimbursed by Petroleos de Venezuela, S.A. (PDVSA). The fourth quarter advances of $15.1 million were invoiced to PDVSA in February 2007. A Memorandum of Understanding between Company affiliates and Corporación Venezolana del Petroleo S.A. and PDVSA Petroleo S.A. provides that upon conversion to Petrodelta, there will be an economic adjustment as if the conversion had been completed on April 1, 2006.

For the nine months ended December 31, 2006, operating statistics (on a 100% basis) for the SMU fields operated by HVSCA are as follows:

•

Production of 5.2 million barrels of oil and 11.5 billion cubic feet (Bcf) of natural gas. Average daily production for the last three quarters was 25,900 barrels of oil equivalent. Oil production for the fourth quarter was 1.6 million barrels and 3.6 Bcf, or average daily production of 23,900 barrels of oil equivalent.

•

Crude oil prices that would be paid for the oil production if the conversion contract were in place cannot be calculated as two elements of the pricing formula have not been set. Market prices for crude oil of the type produced in SMU averaged approximately $47 per barrel for the nine months ended December 31, 2006 and $41 per barrel for the three months ended December 31, 2006. The price for natural gas that would be paid under the conversion contract is $1.54 per thousand cubic feet.

•

Taxes and royalties for Petrodelta will be 50 percent and 33 percent, respectively.

Harvest will hold an earnings conference call today at 10:00 a.m. Central Time to discuss 2006 fourth quarter results. To access the call, dial 785-832-0301, conference ID: Harvest, five to ten minutes prior to the start time. A recording of the conference call will also be available for replay at 402-220-2650. To listen to the live webcast of the call, please visit our website at www.harvestnr.com.

Harvest Natural Resources, Inc. headquartered in Houston, Texas, is an independent energy company with principal operations in Venezuela and business development offices in Russia and the United Kingdom. For more information visit the Company’s website at www.harvestnr.com.

“This press release may contain projections and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. They include estimates and timing of expected oil and gas production, oil and gas reserve projections of future oil pricing, future expenses, planned capital expenditures, anticipated cash flow and our business strategy. All statements other than statements of historical facts may constitute forward-looking statements. Although Harvest believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Actual results may differ materially from Harvest’s expectations as a result of factors discussed in Harvest’s 2006 Annual Report on Form 10-K and other public filings.”
“Cautionary note to investors – The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. From time to time, we use certain terms such as resource potential, risked potential, probable reserves, possible reserves, non-proved reserves or other descriptions of volumes of reserves that SEC guidelines strictly prohibit us from including in filings with the SEC. These estimates are by their nature more speculative than estimates of proved reserves and accordingly, are subject to substantially greater risk of being actually realized by the Company. Investors are urged to consider closely the disclosure in our 2006 Annual Report on Form 10-K and other public filings.”

1177 Enclave Parkway, Suite 300 • Houston, Texas 77077 • ph: 281.899.5700 fax:
281.899.5702


HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
($ thousands, unaudited)
				December 31,			December 31,
				2006			2005
ASSETS:



CURRENT ASSETS:
	Cash and cash equivalents			$	148,079		$	163,019
	Restricted cash				15,888			-
	Accounts receivable, net				9,811			71,650
	Advances to provisional equity affiliate				19,146			-
	Deferred income taxes				5,608			3,052
	Prepaid expenses and other				1,246			2,149

		Total current assets			199,778			239,870

RESTRICTED CASH					73,001			-
OTHER ASSETS					176			1,600

INVESTMENT IN PROVISIONAL EQUITY AFFILIATE					146,436			-

PROPERTY AND EQUIPMENT, net					3,320			159,328


			TOTAL ASSETS	$	422,711		$	400,798


LIABILITIES AND STOCKHOLDERS’ EQUITY:


CURRENT LIABILITIES:
	Accounts payable, trade and other			$	3,827		$	408
	Accounts payable, related party				9,637			9,203
	Accrued expenses				12,975			18,444
	Accrued interest				6,850			2,637
	Deferred revenue				11,217			6,728
	Income taxes payable				34			18,909
	Current portion of long-term debt				37,674			5,467

		Total current liabilities			82,214			61,796

LONG TERM DEBT					66,977			-

COMMITMENTS AND CONTINGENCIES					-			-
ASSET RETIREMENT LIABILITY					-			2,129
MINORITY INTEREST					28,634			39,361

STOCKHOLDERS’ EQUITY:
	Common stock and paid-in capital				194,556			188,620
	Retained earnings				54,174			112,736
	Accumulated other comprehensive loss				-			-
	Treasury stock				(3,844	)		(3,844	)

		Total stockholders’ equity			244,886			297,512


			TOTAL LIABILITIES
			AND STOCKHOLDERS'
			EQUITY	$	422,711		$	400,798


HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
THREE MONTHS ENDED:	December 31, 2006						December 31, 2005


Barrels of oil sold						2,035
MMCF of gas sold						5,566
Total BOE						2,963
Average price/barrel						$25.83
Average price/mcf						$1.03

-
				$/BOE				$/BOE

REVENUES:
Oil sales						$52,559
Gas sales						5,733
						58,292			19.67

EXPENSES:
Operating expenses						12,839			4.33
Depletion and amortization						11,088			3.74
Depreciation		72				778			0.26
General and administrative		6,260				5,234			1.77
Contribution for Science and Technology Fund		3,887				-			-
Taxes other than on income		195				1,726			0.58
		10,414				31,665			10.68

INCOME (LOSS) FROM OPERATIONS		(10,414	)			26,627			8.99


OTHER NON-OPERATING INCOME (EXPENSE)
Investment earnings and other		2,590				2,223			0.75
Interest expense		(2,232	)			(155)			(0.05	)
Net loss on exchange rates		(100	)			(3)			-
		258				2,065			0.70
-
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS		(10,156	)			28,692			9.69
Income tax expense		7				15,201			5.13

INCOME (LOSS) BEFORE MINORITY INTERESTS		(10,163	)			13,491			4.56
Minority interest in consolidated subsidiary companies		(1,613	)			2,981			1.01

NET INCOME (LOSS)		($8,550	)			$10,510		$	3.55


NET INCOME (LOSS) PER COMMON SHARE:
Basic		($0.23	)			$0.28
Diluted		($0.23	)			$0.27
					-				-
Weighted average shares outstanding:
Basic		37.3		million		37.1		million
Diluted		37.3		million		38.4		million


HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per BOE and per share amounts, unaudited)
YEAR ENDED:	December 31, 2006						December 31, 2005


Barrels of oil sold		1,894				8,763
MMCF of gas sold		4,506				25,677
Total BOE		2,645				13,042

Average price/barrel	$	28.96				$24.02
Average price/mcf	$	1.03				$1.03

-
				$/BOE				$/BOE

REVENUES:
Oil sales	$	54,858				$210,493
Gas sales		4,648				26,448
		59,506				236,941			18.17

EXPENSES:
Operating expenses		9,241				39,723			3.05
Depletion and amortization		9,904				41,237			3.16
Depreciation		606				2,731			0.21
General and administrative		26,421				22,819			1.75
Contribution for Science and Technology Fund		3,887				-			-
Account receivable write-off on retroactive oil price adjustment		-				4,548			0.35
Taxes other than on income		3,948				6,358			0.49
		54,007				117,416			9.01

INCOME FROM OPERATIONS		5,499				119,525			9.16


OTHER NON-OPERATING INCOME (EXPENSE)
Investment earnings and other		9,406				4,205			0.32
Interest expense		(23,156	)			(3,388)			(0.26	)
Net gain (loss) on exchange rates		(121	)			2,752			0.21
		(13,871	)			3,569			0.27
-
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS		(8,372	)			123,094			9.43
Income tax expense		60,917				57,025			4.37

INCOME (LOSS) BEFORE MINORITY INTERESTS		(69,289	)			66,069			5.06
Minority interest in consolidated subsidiary companies		(10,727	)			15,230			1.17

NET INCOME (LOSS)		($58,562	)			$50,839		$	3.89

NET INCOME (LOSS) PER COMMON SHARE:
Basic		($1.57	)			$1.38
Diluted		($1.57	)			$1.32
					-				-
Weighted average shares outstanding:
Basic		37.2		million		36.9		million
Diluted		37.2		million		38.4		million


HARVEST NATURAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
			Three Months Ended December 31,						Year Ended December 31,
			2006			2005			2006			2005
Cash Flows From Operating Activities:
	Net income (loss)			($8,550	)	$	10,510			($58,562	)	$	50,839
	Adjustments to reconcile net income to net cash provided by operating
	activities:
		Depletion, depreciation and amortization		72			11,866			10,510			43,968
		Account receivable write-off on		–			–			–			4,548
		retroactive oil price adjustment
		Deferred compensation expense		–			(210	)		–			(745	)
		Non-cash compensation related charges		1,240			(303	)		5,056			2,230
		Minority interest in consolidated		(1,613	)		2,982			(10,727	)		15,230
		subsidiary companies
		Deferred income taxes					2,982			(2,556	)		2,982
	Changes in operating assets and liabilities:
		Accounts and notes receivable		3,622			3,760			61,839			(4,481	)
		Advances to provisional equity affiliate		(1,912	)		–			(19,146	)		–
		Prepaid expenses and other		(393	)		(1,126	)		903			(723	)
		Commodity hedging contract		–			3,767			–			14,947
		Accounts payable		385			(7,771	)		3,419			(8,020	)
		Accounts payable, related party		116			92			434			(1,860	)
		Accrued expenses		5,464			(122	)		(5,469	)		(10,165	)
		Accrued interest		(16,384	)		44			4,213			2,565
		Deferred revenue		–			6,728			4,489			6,728
		Provision for asset retirement liability		–			113			24			188
		Income taxes payable		(22,203	)		2,781			(18,875	)		(3,566	)

		Net Cash Provided By (Used In)
		Operating Activities		(40,156	)		36,093			(24,448	)		114,665

Cash Flows From Investing Activities:
	Additions of property and equipment			(103	)		(380	)		(1,657	)		(16,147	)
	Investment in provisional equity affiliate			(437	)		–			(513	)		–
	Decrease (increase) in restricted cash			(43,329	)		16			(88,889	)		28
	Investment costs			(30	)		579			503			472
		Net Cash Provided By (Used In)
		Investing Activities		(43,899	)		215			(90,556	)		(15,647	)

Cash Flows From Financing Activities:
	Net proceeds from issuances of common stock			6			6			880			767
	Proceeds from issuance of notes payable			65,116			–			118,953			–
	Payments on long-term debt			(14,302	)		(300	)		(19,769	)		(6,366	)
	Dividends paid to minority interest			–			(15,000	)		–			(15,000	)
		Net Cash Provided By (Used In)
		Financing Activities		50,820			(15,294	)		100,064			(20,599	)

		Net Increase (Decrease) in Cash		(33,235	)		21,014			(14,940	)		78,419
Cash and Cash Equivalents at Beginning of Period				181,314			142,005			163,019			84,600

Cash and Cash Equivalents at End of Period			$	148,079		$	163,019		$	148,079		$	163,019


Delaware	1-10762	77-0196707
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

1177 Enclave Parkway, Suite 300, Houston, Texas		77077
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	Harvest Natural Resources, Inc.

March 13, 2007	By:	Steven W. Tholen

		Name: Steven W. Tholen
		Title: Senior Vice President & Chief Financial Officer


Exhibit No.		Description

99.1		Press release dated March 13, 2007, providing fourth quarter and 2006 results.


Date of Report (Date of Earliest Event Reported):		March 13, 2007


Registrant’s telephone number, including area code:		281-899-5720


CONTACT:
Steven W. Tholen Senior Vice President, Chief Financial Officer (281) 899-5714		Amanda M. Koenig Investor Relations (281) 899-5716