Harvest updates Indonesian operation

The following is an excerpt taken from Houston-based firm Harvest Natural Resources, Inc?s quarterly report, released on Monday. (ed)

Budong-Budong PSC, onshore West Sulawesi (Harvest 47%)
Two drill sites were selected in 2009. Operational activities during the six months ended June 30, 2010 focused on well planning, construction for the two test well sites, mobilization of rig and ancillary equipment to the first drill site and purchase of drilling equipment.

Permitting delays associated with the mobilization of the drilling rig from its port location to the drilling pad have resulted in the expected spud date of the first of two exploratory wells to be pushed into the third quarter of 2010.

In accordance with the farm-in agreement, we expect to fund 100 percent of the well expenditures to earn our 47 percent working interest up to a cap of $10.7 million; thereafter, we will pay in proportion to our working interest.

Prior to drilling the first exploration well, subject to the estimated cost of that well, our partner will have a one-time option to increase the level of the carried interest to a maximum of $20.0 million, and as compensation for the increase, we will increase our participation to a maximum of 54.65 percent.

This equates to a total carried cost for the farm-in of $9.1 million. Our partner intends to exercise their option to increase the level of the carried interest and is currently reviewing the amount of the increase.

During the six months ended June 30, 2010, we had cash capital expenditures of $5.6 million for well planning, construction and drilling equipment and $1.3 million for seismic data processing and reprocessing. The remaining 2010 budget for the Budong PSC is $14.5 million. (end of excerpt)