Harvest Proceeds $32.2m o Maximize Long-Term Value of Venezuelan Operations

Source: www.gulfoilandgas.com 6/19/2015, Location: South America

Harvest Natural Resources, Inc announced that CT Energy Holding SRL, a Venezuelan-Italian consortium, has agreed to purchase from Harvest senior secured notes, convertible notes and warrants. Harvest will immediately receive proceeds of $32.2 million from the sale of the senior secured notes and convertible notes. Harvest could realize up to $42.5 million in additional proceeds from the full exercise of the warrants, which is subject to stockholder approval. Harvest will use today's proceeds from CT Energy Holding SRL to repay its existing long-term debt and to reposition Harvest for long-term growth, both in Venezuela and Gabon.

Harvest today also announced that it has entered into a strategic partnership with CT Energy Holding SRL and CT Energia Holding, Ltd., an international energy trading firm (CT Energia), designed to maximize the long?term success and value of Harvest's Venezuelan operations and its 20.4% investment in Petrodelta S.A. (Petrodelta). Under the terms of this strategic partnership:

- Harvest has entered into a term sheet with Petr?leos de Venezuela, S.A. (PDVSA), Harvest's partner in Petrodelta, for the repositioning and growth of Petrodelta's business;
- Two directors designated by CT Energy Holding SRL and a third, independent director, will join Harvest's board of directors, effective immediately;
- Harvest has agreed to appoint two of CT Energy Holding SRL's designees as Harvest's representatives on the Petrodelta board of directors;
- CT Energia has entered into a management contract to oversee the day-to-day operations of Harvest's Venezuelan business and to assist with the development of a plan for the business operations and financing for Petrodelta and the negotiation of definitive documents to implement such plan; and
- During the term of the management contract, Alessandro Bazzoni, the Chief Executive Officer of CT Energia who has over 15 years of experience in the oil and gas industry, will be appointed Director and General Manager - Venezuelan Operations for Harvest.

In announcing the funding and strategic partnership, Harvest Chief Executive Officer James A. Edmiston said, "CT Energy Holding's funding addresses our liquidity requirements for the near and medium term and will enable us to reinvest in our business, particularly in our Venezuelan operations and in the success of Petrodelta." Edmiston continued, "Our strategic partnership with CT Energy Holding represents an important step forward in creating and implementing a new model for the operations and financing for Petrodelta, which will benefit all stakeholders. The additional capital will allow us to continue our exploration and development work in our exciting Dussafu Block in Gabon."

Harvest's Chairman of the Board, Stephen D. Chesebro', stated, "We are also delighted to welcome Oswaldo Cisneros, Francisco D'Agostino and Edgard Leal, well-known senior executives with deep knowledge of Venezuela, to our board. We look forward to working with them, as well as Mr. Bazzoni, on repositioning Harvest's Venezuelan operations for growth. I also wish to express, on behalf of Harvest, my deepest appreciation for the past service and contributions of Dr. Igor Effimoff, H. H. Hardee and J. Michael Stinson, who are stepping down from our board today."

Mr. Bazzoni, Chief Executive Officer of CT Energia, commented, "We are excited to partner with Harvest and its management team in the next phase of Harvest's long?term strategy. We are confident that with this new liquidity and opportunity to reposition its Venezuelan operations, Harvest is well positioned to drive exceptional value for its shareholders as well as the other equityholders of Petrodelta. We see Harvest offering tremendous upside potential and promise, and I look forward to working on a day-to-day basis with Harvest's employees in Venezuela."

Terms of the transaction include:

- CT Energy Holding SRL is acquiring a $25.225 million, five year, 15.00% senior secured non-convertible note and a $6.975 million, five year, 9.00% senior secured convertible note. The convertible note is immediately convertible into 8,506,097 shares of Harvest common stock, or approximately 19.9% of Harvest's currently outstanding common stock. Harvest is also issuing to CT Energy Holding SRL 69.75 shares of a newly created series of preferred stock that will entitle the holder to vote on an "as-if" converted basis.

- CT Energy Holding SRL will also acquire a warrant to purchase up to 34,070,820 shares of Harvest's common stock at an exercise price of $1.25 per share. The warrant will become exercisable only after the 30-day volume weighted average price of Harvest's common stock equals or exceeds $2.50 per share and Harvest's stockholders approve the transaction with CT Energy Holding SRL by a majority of votes cast, as required by the New York Stock Exchange (NYSE) shareholder approval rules. The warrant is cash-exercisable, but CT Energy Holding SRL may surrender the non-convertible note to pay for a portion of the aggregate exercise price.

- At its upcoming annual shareholder meeting, which is expected to occur in August of 2015, Harvest stockholders will be asked to approve the transaction under NYSE shareholder approval requirements and to approve an amendment to Harvest's charter to authorize new shares of common stock in an amount sufficient for future needs, including the full conversion of the convertible note and full exercise of the warrant issued in the transaction. If stockholder approval is not obtained, CT Energy Holding SRL may elect to accelerate full repayment of the non-convertible and convertible note upon 60-days' notice. Upon acceleration of the notes, Harvest would be required to seek alternative financing for the liquidity and the strategic partnership would be terminated.

- Pro forma for the transaction, CT Energy Holding SRL would own 16.5% of Harvest's common stock outstanding prior to the shareholder approval and 49.9% of common stock outstanding following the shareholder approval and exercise of the warrants.

Norton Rose Fulbright US LLP acted as legal counsel to Harvest.

D'Agostino & Co. served as financial advisor and Wachtell, Lipton, Rosen & Katz acted as legal counsel to CT Energy Holding SRL.

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