10-K 1 c289-20161231x10k.htm 10-K 20161231 10K

  

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016 

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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)

(I.R.S. Employer

Identification Number)



 

1177 Enclave Parkway, Suite 300

Houston, Texas

77077

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (281) 899-5700

Securities registered pursuant to Section 12(b) of the Act:

 



 



 

Title of each class

 

Name of each exchange on which registered

 

Common Stock, $.01 Par Value

NYSE

Securities registered pursuant to Section 12(g) of the Act: Series B Preferred Share Purchase Rights; Series D Preferred Share Purchase Rights

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No    

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No   

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 website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   

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 definitions 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   

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2016 was: $34,653,384.  

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date. Class: Common Stock, par value $0.01 per share, on February 23, 2017, shares outstanding: 11,042,933.  



 

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HARVEST NATURAL RESOURCES, INC.

FORM 10-K

TABLE OF CONTENTS

 



 

 



 

 

 

 

Page

Part I

 

 

Item 1.

Business

Item 1A.

Risk Factors

10

Item 1B.

Unresolved Staff Comments

16 

Item 2.

Properties

16 

Item 3.

Legal Proceedings

17 

Item 4.

Mine Safety Disclosures

18 

Part II

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

19 

Item 6.

Selected Financial Data

19

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

29 

Item 8.

Financial Statements and Supplementary Data

29 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

29 

Item 9A.

Controls and Procedures

29 

Item 9B.

Other Information

29 

Part III

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

30 

Item 11.

Executive Compensation

33 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

39 

Item 13.

Certain Relationships and Related Transactions, and Director Independence

40 

Item 14.

Principal Accountant Fees and Services

41 

Part IV

 

 

Item 15.

Exhibits and Financial Statement Schedules

S-1

Item 16.

Form 10-K Summary

S-43



 

Financial Statements

S-6



 

Signatures

S-44



 





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PART I

Cautionary Notice Regarding Forward-Looking Statements

Harvest Natural Resources, Inc. (“Harvest,” the “Company,” “we,” “us,” or “our”) cautions that any forward-looking statements, as that term is defined in Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (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,” “expects,” “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 include, among other factors, the possibility that the closing conditions to the proposed sale of our Gabon 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 Gabon interests or the possibility of non-consummation of the proposed sale of our Gabon interests or the proposed dissolution and liquidation; the occurrence of any event that could give rise to termination of the Gabon sale and purchase agreement; risks related to the disruption of the proposed sale of our Gabon interests or the proposed dissolution and liquidation of Harvest and its operations and management; the effect of announcement of the proposed sale of our Gabon interests or the proposed dissolution and liquidation on Harvest’s ability to retain and hire key personnel and maintain relationships with its 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 Gabon; political and economic risks associated with international operations; 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; 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; availability and cost of drilling rigs and seismic crews; political stability; civil unrest; acts of terrorism; risks associated with third-party claims and litigation and the difficulty of controlling related outcomes or assessing ultimate liabilities; 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; changes in weather conditions; our ability to continue as a going concern; and other risks, including those discussed in our public filings.

Item 1.    Business

Executive Summary

Harvest Natural Resources, Inc. is a petroleum exploration and production company incorporated under Delaware law in 1988.  Our historical focus has been on acquiring exploration, development and producing properties in geological basins with proven active hydrocarbon systems.  Our technical, business development and operating personnel have identified low entry cost exploration opportunities in areas with large hydrocarbon resource potential.  We hold exploration acreage offshore of Gabon and operate from our Houston, Texas headquarters. 

We owned and had developed significant interests in Venezuela until October 2016, when we sold these interests.  For more information about the sale of our Venezuela interests, see Sale of Venezuela Interests, below.  On February 23, 2017, our stockholders approved a proposal to sell our Gabon interests under a Sale and Purchase Agreement with BW Energy Gabon Pte. Ltd.  For more information about the proposed sale of our Gabon interests, see Proposed Sale of Gabon Interests, below.  Also on February 23, 2017, our stockholders approved the complete dissolution and liquidation of Harvest Natural Resources, Inc.  For more information about the proposed dissolution and liquidation, see Proposed Dissolution and Liquidation, below.

As of December 31, 2016, we had total assets of $107.1 million, cash of $63.4 million and no debt. For the year ended December 31, 2016, we had no revenues from continuing operations and net cash used in operating activities from continuing operations of $11.9 million. As of December 31, 2015, we had total assets of $47.8 million,  cash of $2.5 million and debt of $0.2 million, which has been recorded as liabilities associated with discontinued operations.  For the year ended December 31, 2015, we had no revenues from continuing operations and net cash used in operating activities from continuing operations of $19.4 million.    See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Discontinued Operations for more information.    

Proposed Dissolution and Liquidation

Following the successful sale of our Venezuelan interests in October 2016 and in light of the proposed sale of our Gabon interests, our board of directors (the “Board”) considered dissolution and liquidation as a possible alternative.  On January 12, 2017, the Board unanimously determined that the dissolution and liquidation of Harvest was advisable, authorized the dissolution and liquidation and recommended that the proposed complete dissolution be submitted to a vote of Harvest’s stockholders.  Our Board

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also adopted a plan of complete dissolution, liquidation, winding up and distribution (the “Plan of Dissolution”) on this date.  Harvest’s stockholders approved the proposed dissolution and liquidation at the special meeting on February 23, 2017.

Under the dissolution, liquidation and winding up process, which remains subject to the control of the Board and Company management, the proceeds from the Gabon transaction would be combined with other Harvest assets to be distributed to Harvest's stockholders, subject to the payment of certain costs and expenses.  The Company currently expects to commence dissolution proceedings as soon as practicable after the closing of the sale of its Gabon interests. 

For more information about the proposed dissolution and liquidation, see Item 1A. Risk Factors – Risk Factors Related to Our Proposed Dissolution and Part IV – Item 15 – Exhibits and Financial Statements Schedules, Note 18 – Plan of Dissolution.

Proposed Sale of Gabon Interests

On December 21, 2016, the Company and its wholly owned subsidiary, HNR Energia BV (“HNR Energia”), entered into a Sale and Purchase Agreement (the “Sale and Purchase Agreement”) with BW Energy Gabon Pte. Ltd, a private Singapore company (“BW Energy”), to sell all of Harvest's oil and gas interests in Gabon.  Harvest’s stockholders approved the proposed sale at a special meeting on February 23, 2017.  The sale remains subject to additional conditions before it can close.

Under the terms of the Sale and Purchase Agreement, BW Energy will acquire HNR Energia's 100 percent interest in Harvest Dussafu B.V. (“Harvest Dussafu”), which owns a 66.667 percent interest in the Dussafu production sharing contract covering a 210,000 acre area located in offshore Gabon.  BW Energy will pay HNR Energia $32.0 million in cash for the interest, subject to certain adjustments.  BW Offshore Singapore Pte. Ltd, an affiliate of BW Energy and BW Offshore Limited, a global provider of floating production services to the oil and gas industry, has guaranteed the obligations of BW Energy under the Sale and Purchase Agreement.  At the closing of the transaction, $2.5 million of the $32.0 million purchase price will be deposited in escrow, to be held for up to six months to satisfy any post-closing claims that BW Energy may have for any breaches of warranties made by Harvest and HNR Energia under the Sale and Purchase Agreement.

Based on the terms of the Sale and Purchase Agreement, it is the opinion of the Company that no impairment is needed for the Dussafu project for the year ended December 31, 2016.  During the year ended December 31, 2016, the Company conducted an inventory analysis and based on the condition of the equipment, we lowered the value of inventory by $1.5 million.

For more information about the proposed sale of our Gabon interests, see Item 1A. Risk Factors – Risk Factors Related to the Proposed Sale of Our Gabon Interests and Part IV – Item 15 – Exhibits and Financial Statements Schedules, Note 8 – Gabon.

Reverse Stock Split

After the market closed on November 3, 2016, the Company completed a one-for-four reverse split of its issued and outstanding common stock.  In connection with the reverse stock split, the Company amended its amended and restated certificate of incorporation to reduce the authorized number of shares of common stock from 150,000,000 to 37,500,000.  The Company’s common stock began trading on a split-adjusted basis at market open on November 4, 2016.  All share, warrants, options, restricted stock, stock appreciation rights, restricted stock units and per share amounts in this report been reported on a post-split basis.

Sale of Venezuela Interests

On October 7, 2016, Harvest completed the sale of all of its interests in Venezuela.  The sale occurred pursuant to a June 29, 2016 share purchase agreement (the “Share Purchase Agreement”), under which HNR Energia sold its 51 percent interest in Harvest-Vinccler Dutch Holding B.V., a Netherlands company (“Harvest Holding”), to Delta Petroleum N.V., a limited liability company organized under the laws of Curacao (“Delta Petroleum”).  Harvest Holding indirectly owned a 40% interest in Petrodelta S.A. (“Petrodelta”), through which all of the Company’s interests in Venezuela were owned.  As a result of the sale, Harvest Holding’s effect on results of operations and other items directly related to the sale have been reported as discontinued operations.  See Part IV – Item 15 – Exhibits and Financial Statements Schedules, Note 5 – Dispositions and Discontinued Operations for further information. 

CT Energy Holding SRL, a private investment firm organized as a Barbados Society with Restricted Liability (“CT Energy”),  assigned all of its rights and obligations under the Share Purchase Agreement to its affiliate, Delta Petroleum, on September 26, 2016.  We have no control or ownership interest in Delta Petroleum.  For more information about CT Energy, see Sale of Securities to CT Energy, below.

At the closing, the Company received consideration consisting of:

·

$69.4 million in cash paid after various closing adjustments.

·

An 11% non-convertible senior promissory note payable by Delta Petroleum to HNR Energia six months from the closing date in the principal amount of $12.0 million, guaranteed by the sole member and sole equity-holder of Delta Petroleum (the “11% Note”).

·

The return of all of the Company’s common stock owned by CT Energy, consisting of 2,166,900 shares to be held by the Company as treasury shares.

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·

The cancellation of $30.0 million in outstanding principal under the 15% Note (as defined below under Sale of Securities to CT Energy).

·

The cancellation of the CT Warrant (as defined below under Sale of Securities to CT Energy).

To fund Harvest’s transaction expenses and operations until the closing under the Share Purchase Agreement, CT Energy loaned Harvest $2.0 million on each of June 21, 2016, July 20, 2016, August 24, 2016 and September 21, 2016 under the Additional Draw Note.  At the closing, the outstanding principal and accrued interest totaling $38.9 million and $1.4 million, respectively, under both the 15% Note and the Additional Draw Note (as defined below under Sale of Securities to CT Energy), were repaid, net of withholding tax and the 15% Note and Additional Draw Note were terminated.  The $69.4 million in cash referenced above is after the $10.6 million of adjustments.

The relationship between the Company and CT Energy effectively terminated upon the completion of the sale under the Share Purchase Agreement.  All Company securities held by CT Energy were terminated or relinquished, and Oswaldo Cisneros and Alberto Sosa resigned as CT Energy’s non-independent designees to the Company’s board of directors.  Additionally, all liens securing Company debt formerly owed to CT Energy were released at the closing.  Upon the closing, the Company’s primary assets were cash from the proceeds of the transaction and the Company’s oil and gas interests in Gabon.  For more information regarding our prior relationship with CT Energy, see Sale of Securities to CT Energy, below.

Sale of Securities to CT Energy

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, 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.  

Key terms of the transaction included:

·

The Company issued a $25.2 million, five year, 15.0% non-convertible senior secured promissory note (the “15% Note”).

·

The Company issued 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 2,166,900 shares of Harvest common stock at a conversion price of $3.28 per share on September 15, 2015.

·

The Company issued a warrant to purchase up to 8,517,705 shares of Harvest's common stock at an initial exercise price of $5.00 per share (the “CT Warrant”), subject to certain conditions set forth in the CT Warrant.

·

The Company issued a five-year 15.0% non-convertible senior secured note (the “Additional Draw Note”), under which CT Energy could 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.

·

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 provided management services with respect to the operations of the Company’s business as it relates to Petrodelta and Venezuela generally.

Upon the October 7, 2016 closing of the sale of all of the Company’s Venezuelan interests to an affiliate of CT Energy, the securities sold to CT Energy under the Securities Purchase Agreement, as well as CT Energy’s governance rights, the Securities Purchase Agreement, the Management Agreement and the Company’s relationship with CT Energy, generally, were terminated.  See Sale of Venezuela Interests, above, for more information.

Other Recent Events

Special Meeting of Stockholders

At our special meeting of stockholders on February 23, 2017, our stockholders voted to (1) authorize the sale by us, indirectly through a subsidiary, of all of our interests in Gabon upon the terms and conditions set forth in the Sale and Purchase Agreement; (2) approve, on an advisory basis, compensation that will or may become payable by us to our named executive officers in connection with the sale of our Gabon interests; and (3) authorize the complete liquidation and dissolution of Harvest.

Rights Agreement to Protect Net Operating Losses

On February 16, 2017, the Board adopted a Rights Agreement (the "Rights Plan") designed to preserve the Company’s tax assets.  As of December 31, 2016, the Company had cumulative net operating loss carryforwards ("NOLs") of approximately $56.0 million, which can be utilized in certain circumstances to offset possible future U.S. taxable income. 

Harvest's ability to use these tax benefits would be limited if it were to experience an "ownership change" as defined under Section 382 of the Internal Revenue Code. An ownership change would occur if stockholders that own (or are deemed to own) at least

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five percent or more of Harvest's outstanding common stock increased their cumulative ownership in the Company by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. The Rights Plan reduces the likelihood that changes in Harvest's investor base would limit Harvest's future use of its tax benefits.

In connection with the adoption of the Rights Plan, the Board declared a non-taxable dividend of one preferred share purchase right for each share of the Company's common stock outstanding as of February 17, 2017. Effective as of the close of business on February 17, 2017, if any person or group acquires five percent or more of the outstanding shares of the Company's common stock, or if a person or group that already owns five percent or more of the Company's common stock acquires additional shares ("acquiring person or group"), then, subject to certain exceptions, there would be a triggering event under the Rights Plan. The rights would then separate from the Company's common stock and entitle the registered holder to purchase from the Company one one-hundredth of a share of the Series D Preferred Stock of the Company at a price of $26, subject to adjustment. Rights held by the acquiring person or group will become void and will not be exercisable.

The Board has the discretion to exempt certain transactions, persons or entities from the operation of the Rights Plan if it determines that doing so would not jeopardize or endanger the Company's use of its tax assets or is otherwise in the best interests of the Company. The Board also has the ability to amend or terminate the Rights Plan prior to a triggering event. The rights issued under the Rights Plan will expire on February 17, 2020, or on an earlier date if certain events occur, as described more fully in the Rights Plan that the Company filed with the SEC on February 21, 2017.

Amendments to 15% Note

As discussed above under Sale of Securities to CT Energy, Harvest issued the 15% Note to CT Energy on June 19, 2015. 

Effective as of December 31, 2015, Harvest and CT Energy executed a first amendment to the 15% Note that increased the principal amount of the 15% Note to $26.1 million to reflect a loan back to Harvest equal to the amount of interest that otherwise would have been due to CT Energy on January 1, 2016, less applicable withholding tax.

Effective as of 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 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. 

Effective as of May 3, 2016, the Company and CT Energy executed 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 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 principal amount of the 15% Note immediately prior to October 7, 2016 was $30.9 million.

The 15% Note was terminated on October 7, 2016 upon the closing of the sale of all of the Company’s Venezuelan interests to an affiliate of CT Energy.  See Sale of Venezuela Interests, above, for more information.

CT Energia Note

On January 4, 2016, HNR Finance provided a loan to CT Energia of $5.2 million under an 11.0% promissory note due 2019 (the “CT Energia Note”).  The purpose of the loan was to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta. The loans to Petrodelta were to assist Petrodelta in satisfying its working capital needs and discharging its obligations. Interest on the CT Energia Note was due and payable on the first of each January and July, commencing July 1, 2016. The full amount outstanding, including any unpaid accrued interest, was due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan was the payments of principal and interest from loans that CT Energia had made to Petrodelta. 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.

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 not be collected.  As discussed above under “Sale of Venezuela Interests,” the Company sold its interest in the CT Energia Note upon the October 7, 2016 sale of its 51 percent interest in Harvest Holding, the parent company of HNR Finance, which held the CT Energia Note.

Elimination of Series C Preferred Stock

On February 19, 2016, the Company filed a Certificate of Elimination with the Delaware Secretary of State, which eliminated all matters set forth in the Certificate of Designations of Preferred Stock, Series C of Harvest Natural Resources, Inc. from the

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Company’s Amended and Restated Certificate of Incorporation and returned all shares of the Series C Preferred Stock, to the status of authorized but unissued shares of preferred stock of the Company.  The Company had issued 69.75 shares of Series C Preferred Stock to CT Energy on June 19, 2015 together with the 9% Note.  All outstanding shares of Series C Preferred Stock were redeemed in connection with the September 15, 2015 conversion of the 9% Note.  See Sale of Securities to CT Energy, above, for more information.

Compliance Under NYSE Listing Standards

After the market closed on November 3, 2016, the Company completed a one-for-four reverse split of its issued and outstanding common stock.  The reverse stock split was conducted to correct a stock price deficiency under the listing standards of the New York Stock Exchange (the “NYSE”), which provide, generally, that a listed company’s stock must exceed $1.00.  The Company’s common stock price increased significantly following the reverse stock split ($6.18 per share as of December 31, 2016), and the Company has now regained compliance with the NYSE’s minimum price listing standard.  See Reverse Stock Split, above, for more information.

On April 25, 2016, the Company received a notice from the NYSE stating that the Company was 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.   The Company believes that the sale of its Venezuelan interests on October 7, 2016 ultimately will allow it to regain compliance with this listing standard by increasing its stockholders’ equity.  However, the Company must demonstrate compliance for two consecutive financial quarters before the deficiency can be cured.

For more information regarding the Company’s NYSE listing, see Item 1A. Risk Factors – Risks Related to the Proposed Sale of Our Gabon Interests – We expect to delist our common stock on the New York Stock Exchange after the consummation of the proposed sale of our Gabon interests.

Business Strategy

Following the October 7, 2016 sale of its Venezuelan interests, Harvest’s primary tangible, non-cash asset consists of its interests in Gabon.  These interests are owned through the Company’s wholly owned subsidiary, Harvest Dussafu, which owns a 66.667 percent interest in the Dussafu production sharing contract covering a 210,000 acre area located in offshore Gabon.  On February 23, 2017, the Company’s stockholders approved the sale of the Company’s interests in Gabon pursuant to a Sale and Purchase Agreement with BW Energy and HNR Energia.  See Proposed Sale of Gabon Interests, above, for more information.

In light of the successful sale of our Venezuelan interests in October 2016 and the proposed sale of our Gabon interests, our Board had considered dissolution and liquidation as a possible alternative.  After further consideration, on January 12, 2017, our Board unanimously determined that a proposed dissolution is advisable and in the best interests of us and our stockholders, adopted an initial plan of dissolution and liquidation, authorized the proposed dissolution, recommended that our stockholders authorize the proposed dissolution in accordance with the Plan of Dissolution and Liquidation, and generally authorized our officers to take all necessary actions to affect our dissolution.  Harvest’s stockholders approved the proposed dissolution and liquidation at the special meeting on February 23, 2017.    

If the proposed sale of our Gabon interests is completed, almost all of our assets will consist of cash.  We will use the proceeds from the sale of our Gabon interests to pay expenses and taxes, if any, associated with the sale and for other operating expenses. Subject to determinations to be made by our Board, the remaining proceeds will be used to provide reserves of funds for future or contingent liabilities as may be determined necessary by our Board pursuant to Delaware law, to pay or settle existing obligations, to pay costs (including taxes) associated with the liquidation and winding up of our business, and to distribute remaining assets to our stockholders. If we do not dissolve Harvest (because our directors decide to abandon the dissolution), then the proceeds may be used for the continued operation of our business, including the possible acquisitions of assets.

For more information about our business strategy, see Item 1A. Risk Factors – Risks Related to Our Proposed Dissolution and Liquidation and the Proposed Sale of Our Gabon Interests and Part IV – Item 15 – Exhibits and Financial Statements Schedules, Note 18 – Plan of Dissolution. 

Available Information

We file annual, quarterly and current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”). The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549-0213. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

We also make available, free of charge on or through our Internet website (http://www.harvestnr.com), our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports filed or

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furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Forms 3, 4 and 5 filed with respect to our equity securities under Section 16(a) of the Exchange Act are also available on our website. In addition, we have adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our chief executive officer and principal financial and accounting officer. The text of the Code of Business Conduct and Ethics has been posted on the Corporate Governance section of our website. We post on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics applicable to our senior officers. Additionally, the Code of Business Conduct and Ethics is available in print to any person who requests the information. Individuals wishing to obtain this printed material should submit a request to Harvest Natural Resources, Inc., 1177 Enclave Parkway, Suite 300, Houston, Texas 77077, Attention: Investor Relations.

Operations

As of December 31, 2016, our only operations are conducted offshore of Gabon through the Dussafu Production Sharing Contract (“Dussafu PSC”). We have a 66.667 percent interest in the Dussafu PSC and we are the operator.

Dussafu Marin, Offshore Gabon

General

Our Gabon interests consist of our 66.667 percent ownership interest in the Dussafu PSC. We acquired this ownership interest in 2008 through two separate acquisitions. We are the operator of the Dussafu PSC. The other 33.333 percent ownership interest in the Dussafu PSC is currently held by Pan-Petroleum Gabon B.V. (“Pan-Petroleum”). In addition to the Sale and Purchase Agreement to acquire our interests in Gabon, BW Energy also has entered into a memorandum of understanding with Pan-Petroleum relating to the proposed acquisition of a further 25 percent interest in the Dussafu PSC. If both of these transactions close, BW Energy would own a 91.667 percent interest in the Dussafu PSC, Pan-Petroleum would own an 8.333 percent interest in the Dussafu PSC, and we would cease to have any interest in the Dussafu PSC.

Operations under the Dussafu PSC are located offshore Gabon, adjacent to the border with the Republic of Congo, and currently cover an area of 850.5 square kilometers, or approximately 210,163 acres, which is the area included in an exclusive exploitation authorization awarded by the government in July 2014 (“EEA”). All areas outside of the EEA were relinquished in 2016. Water depths in the EEA range from approximately 250 feet to 1,650 feet. Production and infrastructure exist in the blocks contiguous to the Dussafu PSC.

Pan-Petroleum, Harvest and Gabon, represented by the Ministry of Mines, Energy, Petroleum and Hydraulic Resources (the “Ministry”), entered into a third exploration phase of the Dussafu PSC with an effective date of May 28, 2012. On March 26, 2014, we approved a resolution that the discovered fields are commercial to exploit. On June 4, 2014, a declaration of commerciality was signed with Gabon pertaining to four discoveries on the Dussafu project. On July 17, 2014, the Direction Generale Des Hydrocarbures awarded the EEA for the development and exploitation of certain oil discoveries on the Dussafu project. On October 10, 2014, the field development plan (“FDP”) was approved. The third exploration phase expired on May 27, 2016. This expiration will have no effect on the previously discovered fields under the EEA, however, because we have four years from the date of the EEA (that is, until July 16, 2018) to begin production. We have met all funding commitments for the third exploration phase of the Dussafu PSC.  See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation, Contractual Obligations.

In December 2014, we recorded a $50.3 million impairment related to the unproved costs of the Dussafu PSC based on a qualitative analysis that considered our current liquidity needs, our inability to attract additional capital and the decrease in oil and natural gas prices. In December 2015, we reassessed the carrying value of the unproved costs related to the Dussafu PSC and recorded an additional impairment of $23.2 million based on an analysis of the value of the unproved costs that considered the value of the contingent and exploration resources and our ability to develop the project given its current liquidity situation and the depressed price of crude oil. We also impaired the oilfield inventory related to our Gabon interests by $1.0 million as of December 31, 2015. We recorded the oilfield inventory impairment based on the decrease in prices and demand for inventory due. During the year ended December 31, 2016, we also recorded an additional $1.5 million impairment related to the inventory, leaving $1.6 million related to this inventory.  We recorded the oilfield inventory impairment based on the condition of the inventory.

Activity

During 2011, we drilled our first exploratory well, Dussafu Ruche Marin-1 (“DRM-1”), and two appraisal sidetracks. We discovered oil of approximately 149 feet of pay within the Gamba and Middle Dentale Formations. DRM-1 and the sidetracks are currently suspended pending further exploration and development activities.

During the fourth quarter of 2012, our second exploration well commenced which was the Tortue prospect drilled to target stacked pre-salt Gamba and Dentale reservoirs. Dussafu Tortue Marin-1 (“DTM-1”) was spud on November 19, 2012 in a water depth of 380 feet. On January 4, 2013, we announced that DTM-1 had reached a vertical depth of 11,260 feet within the Dentale Formation.

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Log evaluation and pressure data indicate that we have an oil discovery of approximately 42 feet of pay in a 72-foot column within the Gamba Formation and 123 feet of pay in stacked reservoirs within the Dentale Formation.

The first appraisal sidetrack of DTM-1 (“DTM-1ST1”) was spud on January 12, 2013. DTM-1ST1 was drilled to a total depth of 11,385 feet in the Dentale Formation, approximately 1,800 feet from DTM-1 wellbore, and found 65 feet of pay in the primary Dentale reservoir. Several other stacked sands with oil shows were encountered; however, due to a stuck downhole tool, logging operations were terminated before pressure data could be collected to confirm connectivity. The downhole tool was retrieved and the DTM-1 and DTM-1ST1 were suspended for future re-entry.

Operational activities during the year ended December 31, 2016 and 2015 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 square kilometer 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 that 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.



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. 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 and services were completed in March 2016.



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.



Drilling and Undeveloped Acreage

For acquisitions of leases, development and exploratory drilling, we spent approximately $0.3 million in 2016 ($0.9 million in 2015).







In Gabon, following the success in both the pre-salt Gamba and Dentale reservoirs in the two Harvest exploration wells, a new seismic survey commenced in October 2013 and we received the first high quality seismic products during the second quarter of 2014 and interpretation was completed in early 2015. The new 3D seismic data was extended over the two Harvest discoveries and should also enhance the placement of future development wells in the Ruche and Tortue development program. We continue to evaluate our prospects, but we have not drilled any additional wells.

All of our drilling activities are conducted on a contract basis with independent drilling contractors. We do not directly operate any drilling equipment.

Acreage

As of December 31, 2016, we held no developed acreage and 210,163 gross undeveloped acreage (140,109 acres net to our 66.67 percent interest) under concession in Gabon.

Regulation

Our operations and our ability to finance and fund our growth strategy are affected by political developments and laws and regulations in the areas in which we operate. In particular, oil and natural gas production operations and economics are affected by:



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change in governments;

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civil unrest;

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price and currency controls;

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limitations on oil and natural gas production;

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tax, environmental, safety and other laws relating to the petroleum industry;

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changes in laws relating to the petroleum industry;

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changes in administrative regulations and the interpretation and application of administrative rules and regulations; and

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changes in contract interpretation and policies of contract adherence.

In any country in which we may do business, the oil and natural gas industry legislation and agency regulation are periodically changed, sometimes retroactively, for a variety of political, economic, environmental and other reasons. Numerous governmental departments and agencies issue rules and regulations binding on the oil and natural gas industry, some of which carry substantial penalties for the failure to comply. The regulatory burden on the oil and natural gas industry increases our cost of doing business and our potential for economic loss.

Our operations are subject to various federal, state, local and international laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. The cost of compliance could be significant. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial and damage payment obligations, or the issuance of injunctive relief (including orders to cease operations). Environmental laws and regulations are complex and have tended to become more stringent over time. We also are subject to various environmental permit requirements. Some environmental laws and regulations may impose strict liability, which could subject us to liability for conduct that was lawful at the time it occurred or conduct or conditions caused by prior operators or third parties. To the extent laws are enacted or other governmental action is taken that prohibits or restricts drilling or imposes environmental protection requirements that result in increased costs to the oil and natural gas industry in general, our business and financial results could be adversely affected.

Employees

At December 31, 2016, we employed 16 full-time employees. We augment our employees from time to time with independent consultants, as required.

Item 1A.  Risk Factors 

In addition to other information set forth elsewhere in this Annual Report on Form 10-K, the following factors should be carefully considered when evaluating us.

Risks Related to the Proposed Sale of Our Gabon Interests and Our Proposed Dissolution and Liquidation

Risks Related to the Proposed Sale of Our Gabon Interests

While the proposed sale of our Gabon 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.    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:

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

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the potential disruption to contracting parties and service providers; and

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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 operations.

There is no assurance that the proposed sale of our Gabon interests will be completed.    If the proposed sale is not completed for any reason, the market price of our common stock may decline.  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 inflows, may substantially limit our ability to implement any business strategy.

We cannot assure you that the proposed sale of our Gabon interests will be consummated despite receiving shareholder approval.  The consummation of the proposed sale is subject to the satisfaction or waiver of a number of conditions, including, among others, (1) the requirement that we obtain approvals of the proposed sale from the Government of Gabon; (2) requirements with respect to the accuracy of the representations and warranties of the parties to the Sale and Purchase Agreement; and (3) requirements with respect to the satisfaction or waiver of the covenants and obligations of the parties to the Sale and Purchase Agreement. In addition, the Sale and Purchase Agreement may be terminated in certain circumstances under its terms.

We are required to obtain approvals of the sale of our Gabon interests from the Gabonese Minister in Charge of Economy and the Gabonese Minister in Charge of Petroleum.  There can be no assurances that we will be able to obtain these approvals, or that we

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will be able to obtain these approvals on terms reasonably satisfactory to us and BW Energy. If these approvals are not obtained, then the Sale and Purchase Agreement may be terminated.

We cannot guarantee that all of the conditions to closing will be met.  We or BW Energy may not be able to meet all of the closing conditions, and other closing conditions within the control of other parties (such as the required governmental approvals) may not be met.  BW Energy would not be obligated to close the sale of our Gabon interests and could terminate the Sale and Purchase Agreement if we are not able to satisfy the closing conditions within our control or within the control of others.  We also cannot be sure that circumstances will not rise that would also allow BW Energy to terminate the Sale and Purchase Agreement before the closing.

If the proposed sale does not close for any reason, our Board will be forced to evaluate other options.  Our Board could decide to:

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Negotiate a new sale and purchase agreement for the sale of our Gabon interests.  The terms of any such new purchase agreement may be less favorable to us than the terms of the Sale and Purchase Agreement with BW Energy.  It may not be possible to negotiate a new purchase agreement for the sale of our Gabon interests because there may not be any other offers to buy our Gabon interests on satisfactory terms.  Negotiation of a new purchase agreement would entail a delay in our ability to sell our Gabon interests, during which we will have to continue to use our funds to pay general and administrative and other costs associated with managing the Dussafu PSC.

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Proceed with our proposed dissolution and sell our Gabon interests as part of our winding up procedures.  Our Plan of Dissolution provides that we will sell all of our assets in existence when we dissolve.  If these assets still include our Gabon interests, we will sell those interests on the best terms available, but without stockholder approval.  Any such sale could be on terms less favorable than the terms of the Sale and Purchase Agreement.

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Decide to forego any sale of our Gabon interests in the near future and continue to manage the Dussafu PSC as we have done in the past, without dissolving Harvest.  If we do this, we will have to satisfy our funding obligations for our Gabon operations with our available cash, which will reduce our cash reserves that could otherwise be distributed to our stockholders.  We will also likely continue to incur the overhead costs attendant to being a publicly held company, including legal and accounting fees.

If the proposed sale does not close, our Board will make decisions regarding our future course based on their determination of what is in the best interests of our stockholders.  However, the choices may be limited and may be less favorable to our stockholders than the proposed sale of our Gabon interests to BW Energy under the Sale and Purchase Agreement and our proposed ensuing dissolution.

We will be required to pay a break-up fee of $1.12 million if the Sale and Purchase Agreement is terminated under certain circumstances.  As disclosed in the Sale and Purchase Agreement, if the Sale and Purchase Agreement is terminated for certain reasons, we will be required to pay BW Energy a break-up fee of $1.12 million.

Our 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 pre-existing agreements, our executive officers may receive change of control payments as a result of the consummation of the proposed sale of our Gabon interests, or as a result of the combination of the consummation of the proposed sale and a termination event under the applicable agreement.  If we proceed with our proposed dissolution, it is very likely that the termination of employment of our executive officers will occur at some point in time after the dissolution.  Accordingly, our executive officers may have interests in the proposed sale that are different from, or in addition to, the interests of our stockholders generally. 

There is no guarantee that you will receive any of the net cash proceeds from the proposed sale of our Gabon interests in the form of distributions.    The purchase price for the sale of our interests in Gabon will be paid to our wholly owned subsidiary, HNR Energia, which will distribute the proceeds to us in connection with its dissolution.  While we intend to dissolve after the closing of the sale of our Gabon interests, after the payment of expenses related to the proposed sale (including taxes, if any) and reservation of some of the proceeds for operating costs, contingent liabilities and taxes, 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 not to pursue the dissolution and that we should use all or a significant portion of the net cash proceeds from the sale for purposes other than to pay dividends or make liquidating distributions to stockholders, including continuing our business.

We expect to delist our common stock on the New York Stock Exchange after the consummation of the proposed sale of our Gabon interests.    If the proposed sale of our Gabon interests is consummated, our assets will consist primarily of cash.  The NYSE continued listing requirements provide that a listed company’s securities can be delisted if the company’s operating assets have been substantially reduced.  After the sale of our Gabon interests, we intend to delist our shares of common stock, after which they will no longer be tradable on the NYSE.  The delisting of our common stock from the NYSE would adversely affect liquidity and the trading price of our common stock. 

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If the sale of our Gabon interests fails to close and the Sale and Purchase Agreement is terminated, the NYSE may seek to delist our common stock due to our operating asset base, stock price or for another reason. Under these circumstances, we may seek to be traded on an alternative trading market, including one operated by OTC Markets Group.

Risks Related to our Proposed Dissolution and Liquidation

We cannot assure you that any liquidating distribution will be made to our stockholders or, if made, the exact amount or timing of distributions.  Our dissolution, liquidation and winding up process will be subject to uncertainties.  It is possible that there will be no liquidating distribution made to our stockholders.  The amount and timing of any liquidating distribution to our stockholders will depend on the following factors, among others:

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Whether any potential claimants against us and currently unknown to us could present claims relating to our pre-dissolution operations that we may ultimately have to satisfy;

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The costs we may have to incur to defend new and existing claims, including possible claims against us relating to our dissolution and possible tax audits;

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The costs we may have to incur to continue to prosecute our existing lawsuit against Newfield, as well as possible new claims that we may need to file against others to preserve our rights and the value of our assets;

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The amounts that we will need to pay for general administrative and overhead costs and expenses as an operating company before our dissolution and the amounts that we will need to pay in connection with our post-dissolution survival period;

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The costs attendant on us as a publicly held reporting company under SEC regulations, including legal and auditing fees, especially if we are unable to obtain relief from requirements to continue preparing and filing our annual, quarterly and current reports;

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How much of our funds we will be required to reserve to provide for contingent liabilities, and how long it may take to finally determine whether and how much of those liabilities may have to be paid; and

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How long it will take us to liquidate all of our non-cash assets, including our Gabon interests if we are unable to consummate the transaction described in the Sale and Purchase Agreement.

If the sale of our Gabon interests is not consummated pursuant to the Sale and Purchase Agreement, there can be no assurances that any ultimate sale of those interests can be consummated and we may not be able to continue to fund our commitments under the associated Sale and Purchase Agreement and associated agreements.    Our ability to realize value from our Gabon interests depends on our ability to sell those interests as soon as possible.  We have devoted substantial time and cost to try to market our Gabon interests over the last three years and we believe that the transaction described in the Sale and Purchase Agreement is in our best interests.  However, the consummation of that transaction is subject to several conditions, and there can be no assurances that those conditions will be satisfied or that the Sale and Purchase Agreement will not be terminated. 

If the currently proposed sale of our Gabon interests does not close, then we will need to try to find another buyer, and there can be no assurances that we will be able to do so on terms more favorable to us than the terms of the Sale and Purchase Agreement, or that we will be able to do so at all.  If we are not able to find another buyer within the near future, we will be faced with a decision as to whether we should fund additional substantial commitments to maintain our interests in the Sale and Purchase Agreement or to conserve our funds for ultimate distribution to our stockholders and relinquish our interests in the Sale and Purchase Agreement.  Either of these alternatives would have material adverse consequences to us and to our ability to provide our stockholders with liquidating distributions.

We will continue to incur expenses that will reduce any amounts available for distribution to our stockholders.    Claims, liabilities and expenses from operations, such as operating costs, salaries, directors’ and officers’ insurance, payroll and local taxes, legal, accounting and consulting fees and offices expenses will continue to be incurred by us as we wind down.  We cannot estimate what the aggregate of these expenses will be, but they will reduce the amount of funds available for distribution to our stockholders.

Our stockholders could be held liable for our corporate obligations, up to the amount actually distributed to them in connection with our dissolution.  We will continue to exist for three years after our dissolution, or for such longer period as the Delaware Court of Chancery may direct, for the purpose of continuing to close our business, dispose of our non-cash assets, resolve outstanding litigation, discharge our liabilities and distribute any remaining assets to our stockholders.  Under the Delaware General Corporation Law, if the amount we reserve to satisfy our obligations proves insufficient to satisfy all of our expenses and liabilities, a stockholder who receives a liquidating distribution could be held liable for payment to our creditors of the stockholder’s pro rata share of amounts we owe to our creditors in excess of the reserves, up to but not exceeding the amount actually distributed to the stockholder in connection with our dissolution.  This means that a stockholder could be required to return all liquidating distributions made to the stockholder and receive nothing from us in connection with our dissolution and liquidation.  If a stockholder has paid taxes on amounts previously received, a repayment of all or a portion of those taxes could result in a stockholder incurring a net tax cost if the stockholder’s repayment of an amount previously distributed does not cause a commensurate reduction in taxes payable.  There is no guaranty that the reserves established by us to satisfy our obligations will be adequate to cover all of our obligations.

Our Board may abandon implementation of our Plan of Dissolution.  As permitted by the Delaware General Corporation Law, our directors have the right to abandon our dissolution even after our stockholders have authorized our dissolution.  While our

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Board does not currently intend to do so, it will do so if it determines, based on intervening circumstances, that it is not in the best interest of our stockholders to continue with our dissolution.

Further stockholder approval will not be required in connection with the implementation of our Plan of Dissolution, including for the sale or disposition of all or substantially all of our assets.  Our Plan of Dissolution provides that we may sell our Gabon interests as part of our liquidation process, if the sale of our Gabon interests is not consummated under the Sale and Purchase Agreement.  Our Plan of Dissolution also provides that we may sell our other assets after dissolution, as necessary to affect our Plan of Dissolution.  In either case, under our Plan of Dissolution, we will not seek and are not required to seek additional stockholder authorization of any other asset sale.

Our common stock will cease to be traded at the time of our dissolution.  We intend to close our stock transfer books after our dissolution becomes effective.  As a result, from and after that time, we will not recognize any transfer of our common stock, other than transfers by operation of law as to which we have received adequate written notice.  The record date for determining which stockholders are eligible to receive liquidating distributions will be the date on which our dissolution becomes effective, except as may be necessary to reflect subsequent transfers by operation of law.

We may cease to file our annual, quarterly and current reports with the SEC.  Because of the costs associated with preparing and filing our annual, quarterly and current reports under applicable securities laws, we intend to seek relief from all or some of our reporting obligations as soon as possible after the filing of our certificate of dissolution with the Delaware Secretary of State.  There can be no assurances that we will be able to obtain this kind of relief from the SEC.  However, if we receive relief, certain information about us (including audited financial information) currently reported to you and the public would no longer be available.  Regardless, we do intend to provide our stockholders with reports on the status of our dissolution procedures from time to time, as our Board deems appropriate, either through the filing of current or other reports with the SEC or through other means of communication.

Our officers may have interests in the dissolution that are different from those of our stockholders in general.    In accordance with the terms of pre-existing agreements, such as our employment agreements with executive officers, our executive officers may receive certain benefits as a result of the termination of their employment as a result of our dissolution.  Our officers will likely receive the additional severance benefits to which they became eligible as a result of the sale of our Venezuelan interests on October 7, 2016, because we currently expect to terminate their employment within 730 days following that date.  If we proceed with our dissolution, it is expected that eventually and probably within this 730-day period, we will terminate the employment of all of our executive officers and we will be required to provide them with the severance benefits required by their employment agreements, including the additional severance benefits payable after a change of control.  We estimate that the cost of making these payments will be $12 million.

We may undergo, or may have already undergone, an “ownership change” within the meaning of section 382 of the Code, which could affect our ability to use our net operating losses and certain tax credits for U.S. federal income tax purposes.    Section 382 of the Code contains rules that limit the ability of a corporation that undergoes an ownership change to use its net operating losses and tax credits existing as of the date of the ownership change. For these purposes, an ownership change is generally any change in ownership of more than 50 percent of a corporation’s stock within a rolling three-year period. The Treasury Regulations focus on changes in the ownership of significant stockholders, i.e., those owning, directly or indirectly, five percent or more of the stock of a corporation (“5% Stockholders”). Currently, we do not believe that we have undergone an ownership change in the 2014, 2015 or 2016 taxable years, years in which we incurred significant net operating losses. We intend to monitor future filings with the SEC to determine if additional 5% Stockholders arise or if the ownership percentages of existing 5% Stockholders change, either of which might indicate an ownership change under section 382 of the Code. However, the Treasury Regulations under section 382 of the Code are complex and we cannot assure you that we will be able to detect whether and when we might undergo an ownership change.

If Harvest were to undergo one or more “ownership changes” within the meaning of section 382 of the Code, or if one has already occurred, our net operating losses and certain of our tax credits existing as of the date of each ownership change may be unavailable, in whole or in part, to offset income or gain, if any, from the proposed dissolution and liquidation of our subsidiaries. If we are unable to fully offset any U.S. federal taxable income or gain that results from those proposed dissolutions and liquidation, we may be liable for U.S. federal income taxes that could reduce the assets available for distributions to our stockholders.

On February 16, 2017, our Board adopted the Rights Plan, which is designed to preserve the Company’s tax assets.  For more information, see Item 1. Business – Other Recent Events – Rights Agreement to Protect Net Operating Losses.

Stockholders may not be able to recognize a loss for U.S. federal income tax purposes until they receive a final distribution from us.  As a result of our dissolution and liquidation, for U.S. federal income tax purposes, our stockholders generally will recognize gain or loss, on a per share basis, equal to the difference between (1) the sum of the amount of cash and the fair market value (at the time of the distribution) of property, if any, distributed to them with respect to each share of common stock and (2) their tax basis in each share of our common stock.  A liquidating distribution pursuant to the Plan of Dissolution may occur at various times and in more than one tax year.  Any loss generally will be recognized by a stockholder only in the tax year in which the stockholder

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receives our final liquidating distribution, and then only if the aggregate value of all liquidating distributions with respect to a share of our common stock is less than the stockholder’s tax basis for that share.  Stockholders are urged to consult with their own tax advisors as to the specific tax consequences to them of our dissolution, liquidation and winding up pursuant to the Plan of Dissolution.

The tax treatment of any liquidating distribution may vary from stockholder to stockholder.  We have not requested a ruling from the IRS with respect to the anticipated tax consequences of our complete dissolution and liquidation, and we will not seek an opinion of counsel with respect to the anticipated tax consequences of any liquidating distributions. If any of the anticipated tax consequences prove to be incorrect, the result could be increased taxation at the corporate or stockholder level, thus reducing the benefit to our stockholders and us from our dissolution and liquidation. Tax considerations applicable to particular stockholders may vary with and be contingent on the stockholder’s individual circumstances. You should consult your own tax advisor for tax advice.

General Risks Related to Our Business and Industry

We have entered into a Sale and Purchase Agreement to sell our Gabon interests.  However, there can be no assurance that we will be able to consummate the sale of our Gabon interests.  For so long as we continue to operate our Gabon interests, we are subject to a number of risks related to our business and industry, including those discussed below.

Our business may be sensitive to market prices for oil and natural gas. We have made significant investments in our oil and natural gas properties.  To the extent market values of oil and natural gas decline, the valuation of the investments in these projects may be adversely affected.

Global market and economic conditions, including those related to the credit markets, could have a material adverse effect on our business, financial condition and results of operations. A general slowdown in economic activity could adversely affect our business by impacting our ability to access additional capital as well as the need to preserve adequate development capital in the interim.

Our portfolio of hydrocarbon assets in known hydrocarbon basins globally is exposed to greater deal execution, operating, financial, legal and political risks. The environments in which we operate are often difficult and the ability to operate successfully will depend on a number of factors, including our ability to control the pace of development, our ability to apply “best practices” in drilling and development, and the fostering of productive and transparent relationships with local partners, the local community and governmental authorities. Financial risks include our ability to control costs and attract financing for our projects. In addition, often the legal systems of these countries are not mature and their reliability is uncertain. This may affect our ability to enforce contracts and achieve certainty in our rights to develop and operate oil and natural gas projects, as well as our ability to obtain adequate compensation for any resulting losses. Our business depends on our ability to have significant influence over operations and financial control.

Estimates of oil and natural gas reserves are uncertain and inherently imprecise. These estimates are based upon various assumptions, including assumptions required by the SEC relating to oil prices, drilling and operating expenses, capital expenditures, taxes and availability of funds.

The process of estimating oil and natural gas reserves is complex, requiring significant decisions and assumptions in the evaluation of available geological, geophysical, engineering and economic data for each reservoir. Therefore, these estimates are inherently imprecise. Any significant variance could materially affect the estimated quantities and present value of reserves set forth. Actual production, revenue, taxes, development expenditures and operating expenses with respect to our reserves will likely vary from the estimates used, and these variances may be material.

Our future operations and our development are subject to numerous risks of oil and natural gas drilling and production activities. Oil and natural gas exploration and development drilling and production activities are subject to numerous risks, including the risk that no commercially productive oil or natural gas reservoirs will be found. The cost of drilling and completing wells is often uncertain. Oil and natural gas drilling and production activities may be shortened, delayed or canceled as a result of a variety of factors, many of which are beyond our control. These factors include:

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shortages or delays in the delivery of equipment;

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shortages in experienced labor;

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pressure or irregularities in formations;

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unexpected drilling conditions;

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equipment or facilities failures or accidents;

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remediation and other costs resulting from oil spills or releases of hazardous materials;

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government actions or changes in regulations;

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delays in receiving necessary governmental permits;

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delays in receiving partner approvals; and

·

weather conditions.

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The prevailing price of oil also affects the cost of and availability for drilling rigs, production equipment and related services. We cannot give any assurance that the new wells we drill will be productive or that we will recover all or any portion of our investment. Drilling for oil and natural gas may be unprofitable. Drilling activities can result in dry wells and wells that are productive but do not produce sufficient net revenues after operating and other costs.

We operate in international jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws. The U.S. Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to government and other officials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. Despite our training and compliance programs, we cannot be assured that our internal control policies and procedures will always protect us from acts of corruption committed by our employees or agents. Any additional expansion outside the U.S., including in developing countries, could increase the risk of such violations in the future. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.

Operations in areas outside the United States are subject to various risks inherent in foreign operations. Our operations are subject to various risks inherent in foreign operations. These risks may include, among other things, loss of revenue, property and equipment as a result of hazards such as expropriation, nationalization, war, insurrection, civil unrest, strikes and other political risks, increases in taxes and governmental royalties, being subject to foreign laws, legal systems and the exclusive jurisdiction of foreign courts or tribunals, renegotiation of contracts with governmental entities, changes in laws and policies, including taxes, governing operations of foreign-based companies, currency restrictions and exchange rate fluctuations and other uncertainties arising out of foreign government sovereignty over our international operations. Our international operations may also be adversely affected by laws and policies of the United States affecting foreign policy, foreign trade, taxation and the possible inability to subject foreign persons to the jurisdiction of the courts in the United States.

Our oil and natural gas operations are subject to various governmental regulations that materially affect our operations. Our oil and natural gas operations are subject to various governmental regulations. These regulations may be changed in response to economic or political conditions. Matters regulated may include permits for discharges of wastewaters and other substances generated in connection with drilling operations, bonds or other financial responsibility requirements to cover drilling contingencies and well plugging and abandonment costs, reports concerning operations, the spacing of wells, and unitization and pooling of properties and taxation. At various times, regulatory agencies have imposed price controls and limitations on oil and natural gas production. In order to conserve or limit supplies of oil and natural gas, these agencies have restricted the rates of the flow of oil and natural gas wells below actual production capacity. We cannot predict the ultimate cost of compliance with these requirements or their effect on our operations.

We are subject to complex laws that can affect the cost, manner or feasibility of doing business. Exploration and development and the production and sale of oil and natural gas are subject to extensive federal, state, local and international regulation. We may be required to make large expenditures to comply with environmental and other governmental regulations. Matters subject to regulation include:

·

the amounts and types of substances and materials that may be released into the environment;

·

response to unexpected releases to the environment;

·

reports and permits concerning exploration, drilling, production and other operations; and

·

taxation.

Under these laws, we could be liable for personal injuries, property damage, oil spills, discharge of hazardous materials, remediation and clean-up costs, natural resource damages and other environmental damages. We also could be required to install expensive pollution control measures or limit or cease activities on lands located within wilderness, wetlands or other environmentally or politically sensitive areas. Failure to comply with these laws also may result in the suspension or termination of our operations and subject us to administrative, civil and criminal penalties as well as the imposition of corrective action orders. Moreover, these laws could change in ways that substantially increase our costs. Any such liabilities, penalties, suspensions, terminations or regulatory changes could have a material adverse effect on our financial condition, results of operations or cash flows.

The oil and natural gas business involves many operating risks that can cause substantial losses, and insurance may not protect us against all of these risks. We are not insured against all risks. Our oil and natural gas exploration and production activities are subject to all of the operating risks associated with drilling for and producing oil and natural gas, including the risk of:

·

fires and explosions;

·

blow-outs;

·

uncontrollable or unknown flows of oil, natural gas, formation water or drilling fluids;

·

adverse weather conditions or natural disasters;

·

pipe or cement failures and casing collapses;

·

pipeline ruptures;

15


 

·

discharges of toxic gases;

·

buildup of naturally occurring radioactive materials; and

·

vandalism.

If any of these events occur, we could incur substantial losses as a result of:

·

injury or loss of life;

·

severe damage or destruction of property and equipment, and oil and natural gas reservoirs;

·

pollution and other environmental damage;

·

investigatory and clean-up responsibilities;

·

regulatory investigation and penalties;

·

suspension of our operations; and

·

repairs to resume operations.

If we experience any of these problems, our ability to conduct operations could be adversely affected.

We maintain insurance against some, but not all, of these potential risks and losses. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not insurable.

Competition within the industry may adversely affect our operations. We operate in a highly competitive environment. We compete with major, national and independent oil and natural gas companies for the acquisition of desirable oil and natural gas properties and the equipment and labor required to develop and operate such properties. Many of these competitors have financial and other resources substantially greater than ours.

The loss of key personnel could adversely affect our ability to successfully execute our strategy. We are a small organization and depend on the skills and experience of a few individuals in key management and operating positions to execute our business strategy. Loss of one or more key individuals in the organization could hamper or delay achieving our strategy.

Potential regulations regarding climate change could alter the way we conduct our business. Studies over recent years have indicated that emissions of certain gases may be contributing to warming of the Earth’s atmosphere. In response to these studies, governments have begun adopting domestic and international climate change regulations that requires reporting and reductions of the emission of greenhouse gases. Methane, a primary component of natural gas, and carbon dioxide, a by-product of the burning of oil, gas and refined petroleum products, are considered greenhouse gases. Internationally, the United Nations Framework Convention on Climate Change and the Kyoto Protocol address greenhouse gas emissions, and several countries including the European Union have established greenhouse gas regulatory systems. Any laws or regulations that may be adopted to restrict or reduce emissions of greenhouse gases could require us to incur increased operating and compliance costs, and could have an adverse effect on demand for the oil and natural gas that we produce and as a result, negatively impact our financial condition, results of operations and cash flows.

Our business is dependent upon the proper functioning of our internal business processes and information systems and modification or interruption of such systems may disrupt our business, processes and internal controls. The proper functioning of our internal business processes and information systems is critical to the efficient operation and management of our business. If these information technology systems fail or are interrupted, our operations may be adversely affected and operating results could be harmed. Our business processes and information systems need to be sufficiently scalable to support the future growth of our business and may require modifications or upgrades that expose us to a number of operational risks. Our information technology systems, and those of third party providers, may also be vulnerable to damage or disruption caused by circumstances beyond our control. These include catastrophic events, power anomalies or outages, natural disasters, computer system or network failures, viruses or malware, physical or electronic break-ins, unauthorized access and cyber-attacks. Any material disruption, malfunction or similar challenges with our business processes or information systems, or disruptions or challenges relating to the transition to new processes, systems or providers, could have a material adverse effect on our financial condition, results of operations and cash flows.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Properties

Our corporate headquarters are in Houston, Texas.  Our main corporate office is on a month-to-month lease.   The additional Houston office space leased for our technical support staff expired on February 28, 2017.  We vacated the space for the technical support staff by the end of February 2017.



See Item 1. Business, Operations for a description of our oil and natural gas properties.

16


 

Item 3.  Legal Proceedings

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) (the “Phillips Case”); 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 alleged that the defendants made certain false or misleading public statements and demanded that the defendants pay unspecified damages to the class action plaintiffs based on stock price declines. All of these actions were consolidated into the Phillips Case. On August 25, 2016, the court granted the defendants’ motion to dismiss the Phillips Case and entered a final judgment dismissing the Phillips Case in its entirety. The plaintiffs declined to file an appeal, and the time for the filing an appeal expired on September 26, 2016.

On February 27, 2015, Harvest US and Branta, LLC and Branta Exploration & Production Company, LLC   filed a complaint against Newfield Production Company (“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.  Harvest Holding had 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 these tax assessments was transferred by the Company upon the closing of the sale of the Company’s 51 percent interest in Harvest Holding on October 7, 2016, and remains the responsibility of Harvest Vinccler and not the Company.

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.  Harvest Vinccler had filed claims in the Tax Court in Caracas against the Libertador Municipality for the refund of all municipal taxes paid since 2002.  Any potential liability for these tax assessments was transferred by the Company upon the closing of the sale of the Company’s 51 percent interest in Harvest Holding on October 7, 2016, and remains the responsibility of Harvest Vinccler and not the Company.

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 alleged a January 15, 2015 Request for Arbitration filed by HNR Finance and Harvest Vinccler against the Government of Venezuela before the International Centre for Settlement of Investment Disputes regarding HNR Finance’s investment in Petrodelta (the “Request for Arbitration”) constituted a breach of the Shareholders’ Agreement, dated December 16, 2013, which governed the rights of HNR Energia and Petroandina as shareholders of Harvest Holding (the “Shareholders Agreement”).  Specifically, the Shareholders’ Agreement required HNR Energia to provide advance notice of, and deposit $5.0 million into an escrow account, before bringing any claim against the Venezuelan government. 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

17


 

with Petroandina.  Accordingly, on January 28, 2015, HNR Finance B.V. and Harvest Vinccler withdrew without prejudice the Request for Arbitration.  On October 11, 2016, as described in the following paragraph, the Court of Chancery dismissed this claim with prejudice pursuant to a settlement agreement among the Company, HNR Energia, CT Energy and Petroandina. 

On July 12, 2016, Petroandina filed a second claim against the Company and HNR Energia in the Court of Chancery.  The claim alleged that, by entering into the Share Purchase Agreement to sell its Venezuelan interests to CT Energy, the Company and HNR Energia breached the Shareholders’ Agreement.  The claim requested an injunction to prevent the Company and HNR Energia from completing the proposed transaction with CT Energy.  On August 16, 2016, the Court of Chancery granted Petroandina’s motion for a preliminary injunction.  On September 8, 2016, the Company, HNR Energia, CT Energy and Petroandina entered into a settlement agreement (the “Settlement Agreement”) intended to resolve the claim.  On September 8, 2016, the Court of Chancery granted an order amending its August 16, 2016 order and permitting Harvest and HNR Energia to effect the HNR Energia transaction, provided that the parties complied with the Settlement Agreement.  On October 7, 2016, as contemplated in the Settlement Agreement, Petroandina completed the sale of its 29 percent interest in Harvest Holding to Delta Petroleum, the assignee of CT Energy’s rights and obligations under the Settlement Agreement (the “Petroandina Sale”).  On October 11, 2016, in accordance with the Settlement Agreement, the Court of Chancery issued an order dismissing with prejudice Petroandina’s claims against the Company and HNR Energia.  As part of the Settlement Agreement and effective upon closing of the Petroandina Sale, HNR Energia paid $1,000,000 as part of the October 7, closing of the sale of Harvest Holding as cost as reimbursement for expenses incurred by Petroandina in connection with the litigation related to the Shareholders’ Agreement.  This was included as transaction costs netted with Gain on Sale of Harvest Holding on our consolidated condensed statement of operations and comprehensive income (loss) in discontinued operations during the year ended December 31, 2016.  Additionally, effective upon the closing of the Petroandina Sale, the Company, HNR Energia and CT Energy released Petroandina and its affiliates, and Petroandina released the Company, HNR Energia, CT Energy and their respective affiliates, from all claims or liabilities in connection with the Shareholders’ Agreement, the Share Purchase Agreement or the sale of the Company’s interests in Venezuela arising up to the date of the Settlement Agreement. 

On August 9, 2016, Robert Garfield, a stockholder of the Company, filed a lawsuit in the 215th Civil District Court of Harris County, Texas against the members of the Company’s Board and CT Energy (and the Company, as a nominal defendant).  The lawsuit asserts several class action and derivative claims, including that (i) the Board members breached their fiduciary duties to the Company’s stockholders by negotiating and causing the execution of the Share Purchase Agreement with CT Energy, (ii) CT Energy aided and abetted the Board members in breaching their fiduciary duties and (iii) the proxy statement relating to the transaction contained inadequate disclosures about the proposed transaction.  Among other relief, the lawsuit requested that the court grant an injunction to prevent the completion of the proposed transaction, in addition to unspecified rescissory and compensatory damages and attorneys’ fees and other costs.  On September 14, 2016 plaintiff’s motion for a temporary injunction was denied.  On November 15, 2016, this lawsuit was dismissed without prejudice.



On October 14, 2016, Saltpond Offshore Producing Co., Ltd. (“Saltpond”) filed a petition in the 334th Judicial District Court of Harris County, Texas under Rule 202 of the Texas Rules of Civil Procedure to take a pre-suit deposition of the Company’s general counsel.  Counsel for Saltpond also represents the Possible Plaintiffs in Item 11.  The petition alleges that Alessandro Bazzoni, a representative of CT Energy, obtained proceeds from oil allegedly misappropriated from Saltpond and used these funds to consummate the June 19, 2015 Securities Purchase Agreement between CT Energy and the Company.  The petition “seeks information to pursue a claim under the Uniform Fraudulent Transfer Act.”  A hearing had been scheduled for November 11, 2016 as to whether Saltpond should be entitled to seek information from the Company but the hearing was postponed at the request of Saltpond’s lawyers.  The Company denies the allegations in the petition and intends to mount a vigorous defense.  Because the petition is in its preliminary stages, it is not possible to estimate the likelihood or magnitude of any potential liability at this time.

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.

Item  4.  Mine Safety Disclosures

Not applicable.

 



18


 



PART II.

Item  5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



Recent Sale of Unregistered Securities



We issued the following unregistered securities during the year ended December 31, 2016:

·

On October 7, 2016, we issued 367,950 shares of common stock pursuant to restricted stock units that were issued in 2015.  The shares were issued in a transaction by the Company not involving a public offering, which was exempted from registration pursuant to Section 4(a)(2) of the Securities Act. 



Price Range of Common Stock and Dividend Policy

Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “HNR”. As of December 31, 2016, there were 11,042,933 shares of common stock outstanding, with approximately 370 stockholders of record. The following table sets forth the high and low stock prices for our common stock reported by the NYSE.

 





 

 

 

 

 

 



 

 

 

 

 

 

Year

 

Quarter

 

High

 

Low

2015

 

First quarter

 

4.36 

 

1.76 



 

Second quarter

 

8.32 

 

1.76 



 

Third quarter

 

6.60 

 

3.32 



 

Fourth quarter

 

6.00 

 

1.70 



 

 

 

 

 

 

2016

 

First quarter

 

2.84 

 

1.28 



 

Second quarter

 

3.36 

 

1.72 



 

Third quarter

 

3.48 

 

2.16 



 

Fourth quarter

 

6.21 

 

3.24 



 

 

 

 

 

 

On February 23, 2017, the last stock price for the common stock as reported by the NYSE was $6.71 a share.

Historically, our policy has been to retain earnings to support the growth of our business, and accordingly, our Board of Directors has never declared a cash dividend on our common stock.

In an effort to increase the Company’s stock price above $1.00, as required under the NYSE’s continued listing standards, the Company completed a one-for-four reverse split of its issued and outstanding common stock after the market closed on November 3, 2016.   The Company’s common stock began trading on a split-adjusted basis at market open on November 4, 2016.  In this report, all stock prices for the Company’s common stock are reported on a split-adjusted basis.

Item 6.  Selected Financial Data.

Not applicable.

19


 



Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Operations

We had a net income attributable to Harvest  of  $66.6 million, or $5.35 basic and diluted earnings per share, for the year ended December 31, 2016 compared to a net loss attributable to Harvest of $98.6 million, or $8.71 basic and diluted net loss per share, for the year ended December 31, 2015. Net income attributable to Harvest for the year ended December 31, 2016 includes $2.4 million of exploration expense, $1.5 million of impairment expense – oilfield inventories, $17.4 million of general and administrative costs, investment earnings of $0.3 million, transaction costs associated with the potential sale of Harvest Dussafu of $1.4 million, $0.1 million of income tax expense, $85.8 million of income from discontinued operations and $3.3 million of loss attributable to noncontrolling interest.  Net loss attributable to Harvest for the year ended December 31, 2015 includes $3.9 million of exploration expense, $24.2 million of impairment expense – unproved property costs and oilfield inventories, $16.0 million in general and administrative costs, other income of $0.4 million, $16.4 million of income tax benefit, $153.4 million of loss from discontinued operations and $82.1 million of loss attributable to noncontrolling interest.

Petrodelta

During 2015 and 2016 through the October 7, 2016 sale of our interests in Venezuela, we accounted for the investment in Petrodelta under Accounting Standards Codification (“ASC”) 325 – Investments – Other (the “cost method”).  Under the cost method we did not recognize any equity in earnings from the investment in Petrodelta in our results of operations, but would have recognized cash dividends in the period they had dividends been received.  

As of December 31, 2015, we fully impaired the carrying value of the investment in Petrodelta based on the facts and circumstances at that date and, effective with the October 7, 2016 closing of the CT Energy transaction, we no longer have an ownership interest in Petrodelta.  See Part IV – Item 15 – Exhibits and Financial Statement Schedules, Note 1 – Organization and Note 6 – Investment in Affiliate for further information.

Dussafu Project – Gabon

We are the operator of the Dussafu PSC, which is located offshore Gabon, with a 66.667 percent ownership.    The Dussafu PSC partners and 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 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.

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 the 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.

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. 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 and services were completed in March 2016.  Harvest and its joint venture partner engaged a contractor to undertake a fixed-price, geophysical site survey over multiple potential well locations in the Dussafu block in August 2015.  The survey is a pre-requisite for siting mobile drilling units and other installations required for continuing exploration and development activities over the license.  The survey will provide information about the seabed and shallow geological conditions, essential for the safe siting and operation of these installations. 

On December 21, 2016, the Company and its wholly owned subsidiary, HNR Energia, entered into the Sale and Purchase Agreement with BW Energy to sell all of Harvest's oil and gas interests in Gabon (“Sale and Purchase Agreement”).

Under the terms of the Sale and Purchase Agreement, BW Energy will acquire HNR Energia's 100 percent interest in Harvest Dussafu, which owns a 66.667 percent interest in the Dussafu production sharing contract covering a 210,000 acre area located in offshore Gabon.  BW Energy will pay HNR Energia $32.0 million in cash for the interest, subject to certain adjustments.  BW

20


 

Offshore Singapore Pte. Ltd, an affiliate of BW Energy and BW Offshore Limited, a global provider of floating production services to the oil and gas industry, has guaranteed the obligations of BW Energy under the Sale and Purchase Agreement.

At the closing of the transaction, $2.5 million of the $32.0 million purchase price will be deposited in escrow, to be held for up to six months to satisfy any post-closing claims the purchaser may have for any breaches of warranties made by Harvest and HNR Energia under the Sale and Purchase Agreement.  We also incurred $1.4 million in costs associated with the potential sale of our interests in Gabon reported as transaction costs associated with the potential sale of Harvest Dussafu in our results of operation for the year ended December 31, 2016.

During the year ended December 31, 2016, we had cash capital expenditures of $0.3 million for site survey  ($0.9 million for site survey during the year ended December 31, 2015).  See Item 1. Business, Operations, Dussafu Marin, Offshore Gabon for further information on the Dussafu Project.

In December 2015, the Company reassessed the carrying value of the unproved costs related to the Dussafu PSC and recorded an additional impairment of $23.2 million based on its analysis of the value of the unproved costs which considered the value of the contingent and exploration resources and the ability of the Company to develop the project given its current liquidity situation and the depressed price of crude oil.  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 the Dussafu project.   

In the impairment analysis in December 2015, the Company prepared a quantitative and qualitative assessment of the unproved property which estimated the value of the estimated contingent and exploration resources based on the Company’s ability to develop the project given its current liquidity situation and the depressed price of crude oil.  The valuation model developed used three price scenarios and a development decision tree model which estimated the value of three development options available to the Company.  The value of the development options was determined using outputs from a Monte Carlo simulation model which estimated the net present value of expected future cash flow to be generated from the development of the contingent and exploratory resources in the Dussafu PSC and discounted using a weighted average cost of capital of 21.5%.  The development options considered the probability that the Company would be: a) able to farm-down 50% of their working interest; b) able to sell their working interest; and c) unable to complete either of the first 2 options. All inputs used in the valuation process were primarily level 3 in the fair value hierarchy. The concluded fair value of the unproved property costs in our Dussafu project was $28.0 million.

Based on the terms of the Sale and Purchase Agreement, it is the opinion of the Company that no impairment is needed for the Dussafu project for the year ended December 31, 2016. 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.  We impaired the value of this inventory by approximately $1.0 million in 2015.  During the year ended December 31, 2016, the Company conducted an inventory analysis and based on the condition of the equipment, we lowered the value of inventory by $1.5 million.



Harvest Holding – Discontinued Operations

As referenced above under the Share Purchase Agreement with Delta Petroleum, the Company sold all of its interests in Venezuela and its results of operations were placed in discontinued operations.   As a result of the sale, Harvest Holding’s effect on results of operations and other items directly related to the sale have been reported as discontinued operations.  See Part IV – Item 15 – Exhibits and Financial Statement Schedules, Note 1 – Organization –  Sale of Venezuela Interests for further information

Results of Operations

The following discussion on results of operations for each of the years ended December 31, 2016 and 2015 should be read in conjunction with our consolidated financial statements and related notes thereto.

Years Ended December 31, 2016 and 2015

We reported a net loss from continuing operations of  $22.5 million, or $1.81 basic and diluted net loss per share, for the year ended December 31, 2016, compared with a net loss from continuing operations of $27.3 million, or $2.41 basic and diluted net loss per share, for the year ended December 31, 2015.

21


 

Loss From Continuing Operations

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







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Year Ended December 31,

 

 



  

2016

 

2015

 

Change



 

 

 

 

 

 

 

 

 



 

(in thousands)

Depreciation and amortization

  

$

51 

 

$

87 

 

$

(36)

Exploration expense

  

 

2,361 

 

 

3,900 

 

 

(1,539)

Impairment expense - unproved property costs and oilfield inventories

  

 

1,452 

 

 

24,178 

 

 

(22,726)

General and administrative

  

 

17,409 

 

 

15,958 

 

 

1,451 

Investment earnings and other

  

 

(320)

 

 

(423)

 

 

103 

Transaction costs associated with the potential sale of Harvest Dussafu

 

 

1,427 

 

 

 —

 

 

1,427 

Income tax expense (benefit)

 

 

100 

 

 

(16,450)

 

 

16,550 

Loss from continuing operations

 

$

22,480 

 

$

27,250 

 

$

(4,770)

Our accounting method for oil and natural gas properties is the successful efforts method. During the year ended December 31, 2016, we incurred $1.7 million of exploration costs for the processing and reprocessing of seismic data related to ongoing operations and $0.7 million related to other general business development activities. During the year ended December 31, 2015, we incurred $3.5 million of exploration costs for the processing and reprocessing of seismic data related to ongoing operations and $0.4 million related to other general business development activities.

During the years ended December 31, 2016 and 2015, we recorded impairment expense, related to our Dussafu Project in Gabon, of $1.5 million relating to oilfield inventories and $24.2 million (including $1.0 million relating to oilfield inventories), respectively.  The impairment expense recorded in 2016 reflected analysis of the condition of oilfield inventories.  The impairment expense recorded in 2015 reflected management’s estimate of the decreased value of the project given our current liquidity situation and the decline in global crude oil prices. 

The increase in general and administrative costs in the year ended December 31, 2016 from the year ended December 31, 2015, was primarily due to higher employee related costs ($1.9 million) offset by lower general operations and overhead ($0.1 million), professional fees and contract services ($0.2 million), and travel ($0.1 million).   Employee related costs are higher primarily due to the impact of the increase in the Company’s stock price on stock-based compensation offset by lower employee headcount. Professional fees are lower due to lower litigation, audit fees and consulting costs in 2016 compared to 2015. 

The investment earnings of $0.3 million for the year ended December 31, 2016 was primarily related investment earnings  compared to other income of $0.4 million for the year ended December 31, 2015 primarily related to the reduction of estimated final settlement costs associated with prior financings.

The transaction costs associated with the potential sale of Harvest Dussafu of $1.4 million is primarily related legal costs and a fairness opinion.  See Item 1. Business, Proposed Sale of Gabon Interests for further information.  

We had an income tax expense in the year ended December 31, 2016 of $0.1 million as compared to an income tax benefit of $16.5 million in the year ended December 31, 2015.  The tax expense for the year ended December 31, 2016 was attributable to a deferred tax liability on the accumulated earnings and profits in our foreign subsidiaries that are expected to be repatriated to the U.S. as taxable income when those entities are dissolved pursuant to the Company’s overall Plan of Dissolution  The benefit for the year ended December 31, 2015 was primarily attributable to a reduction in the valuation allowance against the Company’s deferred tax assets for a claim for refund of 2013 taxes and a decrease in the deferred tax liability associated with the Company’s undistributed earnings from its foreign subsidiaries.

Net Loss Attributable to Noncontrolling Interest Owners

Net loss attributable to noncontrolling interest owners was $3.3 million for year ended December 31, 2016 compared to net loss attributable to noncontrolling interest owners of $82.1 million year ended December 31, 2015.  The noncontrolling interest owners own 49 percent interest in Harvest Vinccler and they assisted us in the management of Petrodelta and in negotiations with PDVSAThe net loss attributable to noncontrolling interest owners in 2016 and 2015 was related to their share of the operations of Harvest Vinccler. 



 

22


 



 

Discontinued Operations

Discontinued operations reflect our Venezuela operations prior to the sale on October 7, 2016, including direct costs and operating expenses, and related financial instruments that were settled as part of the Share Purchase Agreement.  We reported net income from discontinued operations of $85.8 million, or $7.16 basic and diluted earnings per share, for the year ended December 31, 2016, compared with a net loss from discontinued operations of $153.4 million, or $6.30 basic and diluted net loss per share, for the year ended December 31, 2015.

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



 



 

 

 

 

 

 

 

 

 



 

Year Ended December 31,

 

 

 



  

2016

 

2015

 

Change



  

(in thousands)

 

 

 

Depreciation

  

$

(15)

 

$

(21)

 

$

Reserve for note receivable - related party

 

 

(5,160)

 

 

 —

 

 

(5,160)

Impairment expense - investment in affiliate

 

 

 —

 

 

(164,700)

 

 

164,700 

General and administrative expense

 

 

(3,291)

 

 

(3,052)

 

 

(239)

Change in fair value of warrant derivative liability

 

 

(9,376)

 

 

34,510 

 

 

(43,886)

Change in fair value of embedded derivative asset and liabilities

 

 

2,412 

 

 

4,813 

 

 

(2,401)

Gain on sale of Harvest Holding

 

 

115,528 

 

 

 —

 

 

115,528 

Interest expense

 

 

(4,239)

 

 

(2,958)

 

 

(1,281)

Loss on debt conversion

 

 

 —

 

 

(1,890)

 

 

1,890 

Loss on issuance of debt

 

 

 —

 

 

(20,402)

 

 

20,402 

Loss on extinguishment of debt

 

 

(10,274)

 

 

 —

 

 

(10,274)

Foreign currency transaction gains

 

 

217 

 

 

320 

 

 

(103)

Income tax expense

  

 

(24)

 

 

(27)

 

 

Net income (loss) from discontinued operations, net of income taxes

  

$

85,778 

 

$

(153,407)

 

$

239,185 





We recorded a $5.2 million allowance during the year ended December 31, 2016 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 not be collected.



We recorded pre-tax impairment charges against the carrying value of our investment in Petrodelta of $164.7 million at December 31, 2015.  



The increase in general and administrative costs related to Venezuela operations in the year ended December 31, 2016 from the year ended December 31, 2015, was primarily due to higher employee related costs ($1.0 million) offset by lower general operations ($0.3 million), professional fees and contract services ($0.4 million), and taxes other than income ($0.1 million).   Employee related costs are higher primarily due to severance costs.   Professional fees are lower due to lower litigation, audit fees and consulting costs related to Harvest Holding in 2016 compared to 2015.



The change in fair value of the warrant liability of $9.4 million loss in 2016 was driven by a 91% increase in stock price during the year ended December 31, 2016; whereas, change in fair value of the warrant liability of $34.5 million during the year ended December 31, 2015 was related to the decrease in fair value of the CT Warrant issued to CT Energy on June 19, 2015.  The fair value decreased due to a decrease in our closing stock price   The CT Warrant was extinguished upon the closing of the October 7, 2016 sale.  See Part IV – Item 15 – Exhibits and Financial Statement Schedules, Note 12 – Warrant Derivative Liability for further information.



The change in fair value of embedded derivative assets of 2.4 million in income is directly related to the assumptions surrounding the commencement of the interest rate reset features in both the 15% Note and the Additional Draw Notes.  The interest rate reset features both lowers the interest rate and extends the due date of the 15% Note and the Additional Draw Notes.  At December 31, 2016, the probability of the interest rate reset feature date being delayed was lowered to 10% and the value of the embedded derivative asset related to the Additional Draw Note was included.  Both of these changes increased the value of the embedded derivative assets for the year ended December 31, 2016.  The change in the fair value of the derivative assets and liabilities of $4.8 million in income during year ended December 31, 2015 was related to the increase in the fair value of the embedded derivative asset of $1.0 million and the decrease in fair value of the derivative liability related to the 9% Note which was converted on September 15, 2015. The 15% Note and Additional Draw Notes were extinguished upon the closing of the October 7, 2016 sale.  See Part I – Financial Information, Item 1 – Financial Statements, Note 11 – Debt and Financing for further information. 

23


 

The $115.5 million gain on the sale of interest in Harvest Holding in the year ended December 31, 2015 relates to the October 7, 2016 closing of our remaining 51 percent interest in Harvest Holding net of transaction and other costs.

The increase in interest expense in the year ended December 31, 2016 from the year ended December 31, 2015 was primarily due to higher outstanding debt balances and higher rates of interest during the year ended December 31, 2016.  The 15% Note and Additional Draw Notes were cancelled upon the closing of the October 7, 2016 sale.

On September 15, 2015, the 9% Note, the associated accrued interest and related derivative liability were converted into 2,166,900 shares of the Company’s common stock.  The Company recognized a $1.9 million loss on debt conversion.   The $1.9 million loss on debt conversion was the result of the difference between the September 14, 2015 carrying value of the 9% Note, including accrued interest and unamortized debt discount ($0.2 million) and the fair value of the related derivative liability ($11.1 million) less the fair value of the 2,166,900 shares issued upon conversion ($13.2 million) at September 15, 2015.  These shares were returned to the Company as a condition of the October 7, 2016 sale.

On June 19, 2015, we issued the CT Warrant, 9% and 15% Notes, Additional Draw Note and Series C preferred stock 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 assets and liabilities in the notes and determined that the CT Warrant did not meet the required conditions to qualify for equity classification and is required to be classified as a warrant liability (See Part IV – Item 15 – Exhibits and Financial Statement Schedules, 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 CT 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, which resulted in no value being attributable to the Series C preferred stock, the 9% and 15% Notes and the Additional Draw Note. As a result of the allocation we recognized a loss on the issuance of these securities of $20.4 million during the year ended December 31, 2015.  These instruments were terminated upon the October 7, 2016 sale.

The loss on extinguishment of debt of $10.3 million was related to the cancellation of the $30.0 million in outstanding principle under the 15% Note and Additional Draw Note in connection with the October 7, 2016 closing of the sale of all the HNR Energia’s 51 percent interest in Harvest Holding to Delta Petroleum.    See Part IV – Item 15 – Exhibits and Financial Statement Schedules, Note 1 – Organization – Sale of Securities to CT Energy for further information.

We recognized a gain on foreign currency transactions for the year ended December 31, 2016 of $0.2 million as compared to $0.3 million gain on foreign currency transactions for the year ended December 31, 2015.  The gains in 2016 and 2015 were primarily associated with a favorable change in exchange rates for Bolivar denominated liabilities. 

Risks, Uncertainties, Capital Resources and Liquidity

The following discussion on risks, uncertainties, capital resources and liquidity should be read in conjunction with our consolidated financial statements and related notes thereto.  See Item 1. Business, Executive Summary for further information.



Liquidity



Our primary assets are cash and our oil and gas interests in Gabon.  We entered into an agreement to sell our oil and gas interests in Gabon; however, there can be no assurances that the signing of an agreement will lead to closing on the transaction. On January 12, 2017, our Board adopted the Plan of Dissolution.  See Part IV – Item 15 – Exhibits and Financial Statement Schedules, Note 18 – Plan of Dissolution for further information.   We expect the cash on hand from the net proceeds received from the sale of our Venezuelan interests on October 7, 2016 will be adequate to meet our short-term liquidity requirements for dissolution of the Company.   

Upon the closing of the sale of the Company’s 51 percent interest in Harvest Holding, the Company received, among other considerations, $69.4 million in net cash proceeds and a $12.0 million note payable from Delta Petroleum, due six months after closing.   A portion of the proceeds from the sale have been and will be used to pay certain severance costs, to pay tax obligations related to the sale, to fund any potential future dividends declared and to maintain ongoing general operating and administrative expenses.  The 15% Note and Additional Draw Notes were extinguished upon the closing of the October 7, 2016 sale. 



On April 25, 2016, the Company received a notice from the NYSE stating that the Company was 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 $50.0 million and, at the same time, its stockholders’ equity is less than $50 million.  The Company believes that the sale of its Venezuelan interests on October 7, 2016 ultimately will allow it to regain compliance with this listing standard by increasing its stockholders’ equity.  However, the Company must demonstrate compliance for two consecutive financial quarters before the deficiency can be cured.       

24


 

The Company completed a one-for-four reverse split of its issued and outstanding common stock on November 3, 2016.  See Part IV – Item 15 – Exhibits and Financial Statement Schedules, Note 1 – Organization – Reverse Stock Split for more information.  All share and per share amounts in this report have been reflected on a post-split basis in these financial statements.

Accumulated Undistributed Earnings of Foreign Subsidiaries

Under ASC 740-30-25-17, no deferred tax liability must be recorded if sufficient evidence shows that a foreign subsidiary has invested or will invest its undistributed earnings or that the 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.

Prior to 2013, no U.S. taxes had been recorded on these earnings as it was our practice and intention to reinvest the earnings of our non-U.S. subsidiaries into our foreign operations.  During the fourth quarter of 2013, management evaluated numerous factors related to the timing and amounts of possible future distribution of foreign earnings to the parent company, with consideration of the sale of non-U.S. assets. Because management was pursuing various alternatives with respect to the Company’s future operations and disposition of any sale proceeds, a determination was made that it was appropriate to record a deferred tax liability associated with the unremitted earnings of our foreign subsidiaries in the fourth quarter of 2013.   As of December 31, 2015, the book-tax outside basis difference in our foreign subsidiaries resulting from unremitted earnings from our foreign operations was reduced to zero due to pre-tax impairments of the Company’s remaining investment in Petrodelta.  This benefit was recorded to continuing operations, consistent with the Company’s continued investment in the foreign subsidiaries. 

As of December 31, 2016, a deferred tax liability of $0.1 million was recorded based on the unremitted earnings of our foreign subsidiaries that would be repatriated to the U.S. pursuant to our overall Plan of Dissolution.  The entire net deferred tax liability as of December 31, 2016 has been reflected as a long-term liability, a characterization consistent with the Company’s adoption of Accounting Standards Update (“ASU”) No. 2015-17.    

Cash Flows

As of December 31, 2016, we have cash and cash equivalents of $63.4 million and no debt.  The net funds raised or used in each of the operating, investing and financing activities from continuing operations are summarized in the following table and discussed in further detail below:



Cash Flow from Continuing Operating Activities

During the year ended December 31, 2016, net cash used in operating activities was approximately $11.9 million ($19.4 million during the year ended December 31, 2015). The $7.5 million decrease in use of cash from operations was primarily from the decreased use of working capital in 2016 due to our decreased activity levels.

Cash Flow from Continuing Investing Activities

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

 





 

 

 

 

 

 



 

 

 

 

 

 



  

Year Ended December 31,



  

2016

 

2015



  

(in thousands)

Dussafu PSC

  

$

290 

  

$

947 

Other administrative property

  

 

382 

  

 

338 

Total additions of property and equipment

 

$

672 

 

$

1,285 



Cash Flow from Continuing Financing Activities



During the year ended December 31, 2016, we incurred $0.1 million in treasury stock purchases.



Cash Flow from Discontinued Operations



Net cash flow from discontinued operations was $73.5 million and $17.0 million for the years ended December 31, 2016 and 2015, respectively.  During the year ended December 31, 2016, the cash flow from discontinued operations was generated primarily related to $66.1 million in proceeds from the sale of Harvest Holding and $11.0 million in financing activities related to the proceeds from 15% Note and the Additional Draw Note.  During the year ended December 31, 2015, the cash flow from discontinued

25


 

operations was generated primarily from financing activities related to the $33.5 million in proceeds from 15% Note and the CT Warrant offset by $8.9 million in debt repayments and $1.6 million in financing costs. 

Effects of Changing Prices, Foreign Exchange Rates and Inflation

Prior to the October 7, 2016, closing of the sale of Harvest Holding, our results of operations and cash flow were 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 Venezuela operations in discontinued operations was $0.2 million for the year ended December 31, 2016 compared to $0.3 million gain on foreign currency transactions for the year ended December 31, 2015.  The gains in 2016 and 2015 were primarily associated with favorable change in exchange rates for Bolivar denominated liabilities. Part IV – Item 15 – Exhibits and Financial Statements Schedules, Note 5 – Dispositions and Discontinued Operations.

There are many factors affecting foreign exchange rates and resulting exchange gains and losses, most of which are beyond our control.    

Within the United States and other countries in which we conducted business, inflation has had a minimal effect on us.

Critical Accounting Policies

Reporting and Functional Currency

USD is the reporting and functional currency for all of our controlled subsidiaries and Petrodelta. Amounts denominated in non-USD currencies are re-measured into USD, and all currency gains or losses are recorded in the consolidated statements of operations and comprehensive income (loss). There are many factors that affect foreign exchange rates and the resulting exchange gains and losses, many of which are beyond our influence.

Investment in Affiliate

During 2015 and 2016 through October 7, 2016 sale of our interests in Venezuela, we accounted for the investment in Petrodelta under Accounting Standards Codification (“ASC”) 325 – Investments – Other (the “cost method”).  Under the cost method we did not recognize any equity in earnings from the investment in Petrodelta in our results of operations, but would have recognized cash dividends in the period they had dividends been received.  

As of December 31, 2015, we fully impaired the carrying value of the investment in Petrodelta based on the facts and circumstances and, effective with the October 7, 2016 closing of the CT Energy transaction, we no longer have an ownership interest in Petrodelta.  See Part IV – Item 15 – Exhibits and Financial Statement Schedules, Note 1 – Organization  – Sale of Venezuela Interests for further information.   

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. 

Property and Equipment



We follow the successful efforts method of accounting for our oil and natural gas properties. Under this method, oil and natural gas lease acquisition costs are capitalized when incurred. Unproved properties are assessed quarterly on a property-by-property basis, and any impairment in value is recognized. We assess our unproved property costs for impairment when events or circumstances indicate a possible decline in the recoverability of the carrying value of the projects.  The estimated value of our unproved projects is determined using quantitative and qualitative assessments and the carrying value of the projects is adjusted if the carrying value exceeds the assessed value of the projects. 

If the unproved properties are determined to be productive, the appropriate related costs are transferred to proved oil and natural gas properties. Lease rentals are expensed as incurred. Oil and natural gas exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells are capitalized pending determination of whether the wells have discovered proved reserves. Exploratory drilling costs are capitalized when drilling is completed if it is determined that there is economic producibility supported by either actual production, conclusive formation tests or by certain technical data. If proved reserves are not discovered, such drilling costs are expensed. Costs to develop proved reserves, including the costs of all development wells and related equipment used in production of crude oil and natural gas, are capitalized.

Depletion, depreciation, and amortization (“DD&A”) of the cost of proved oil and natural gas properties are calculated using the unit of production method. The reserve base used to calculate DD&A for leasehold acquisition costs and the cost to acquire proved

26


 

properties is proved reserves. With respect to lease and well equipment costs, which include development costs and successful exploration drilling costs, the reserve base is proved developed reserves. Estimated future dismantlement, restoration and abandonment costs, net of salvage values, are taken into account. Certain other assets are depreciated on a straight-line basis.

Assets are grouped based upon a reasonable aggregation of properties with a common geological structural feature or stratigraphic condition, such as a reservoir or field.

Amortization rates are updated to reflect: 1) the addition of capital costs, 2) reserve revisions (upwards or downwards) and additions, 3) property acquisitions or property dispositions and 4) impairments.

We account for impairments of proved properties under the provisions of ASC 360, “Property, Plant, and Equipment”. When circumstances indicate that an asset may be impaired, we compare expected undiscounted future cash flows at a producing field level to the amortized capitalized cost of the asset. If the future undiscounted cash flows, based on our estimate of future crude oil and natural gas prices, operating costs, anticipated production from proved reserves and other relevant data, are lower than the amortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is calculated by discounting the future cash flows at an appropriate risk-adjusted discount rate.

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 carry forwards. 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.

Since December 31, 2013, we have provided deferred income taxes on undistributed earnings of our foreign subsidiaries where we are not able to assert that such earnings would be permanently reinvested, or otherwise could be repatriated in a tax free manner, as part of our ongoing business.  As of December 31, 2015, the deferred tax liability provided on such earnings had been reduced to zero due to the impairment of the underlying book investment in Petrodelta.  With the sale of Harvest Holding and the anticipated dissolution of our subsidiary HNR Energia BV under the Company’s Plan of Dissolution, we recorded a deferred tax liability of $0.1 million as of December 31, 2016 on the historical earnings and profits of HNR Energia that would be repatriated to the U.S. as taxable income on that entity’s liquidation.

As the conversion feature of the 9% Note was reasonably expected to be exercised at the time of the note’s issuance due to the conversion price being in-the-money, the interest on the 9% Note paid upon its conversion is non-deductible to the Company under Internal Revenue Code (“IRC”) Section 163(l).  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 is an AHYDO; consequently, the OID has been treated as non-deductible for income tax purposes.



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 since we have no material operating or financing leases.

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

27


 

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 since we have no contingent call (put) options.   

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 do not believe the adoption of this guidance will have a material impact on our financial position, results of operations or cash flows since we have no equity method investments.

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.



In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, or ASU 2016-15. ASU 2016-15 provides specific guidance on eight cash flow classification issues not specifically addressed by GAAP: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments; contingent consideration payments; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in ASU 2016-15 are effective for interim and annual periods beginning after December 15, 2017. ASU 2016-15 should be applied using a retrospective transition method, unless it is impracticable to do so for some of the issues. In such case, the amendments for those issues would be applied prospectively as of the earliest date practicable. Early adoption is permitted. We are currently evaluating the provisions of ASU 2016-15 but do not expect to have a significant impact on the presentation of cash receipts and cash payments within our consolidated statements of cash flows.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. We will be required to adopt the amendments in this ASU in the annual and interim periods beginning January 1, 2018, with early adoption permitted at the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. The application of the amendments will require the use of a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. We are evaluating the standard and the impact it will have on our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

28


 

Item  7A.  Quantitative and Qualitative Disclosures About Market Risk



Not applicable.

Item  8.  Financial Statements and Supplementary Data

The information required by this item is included herein and begins on page S-1.

Item  9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item  9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We have established disclosure controls and procedures that are designed to ensure the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our 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, evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on their evaluation as of December 31, 2016, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Management’s Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of The Treadway Commission. Based on our evaluation under the 2013 Internal Control Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2016.  

Changes in Internal Control over Financial Reporting. There have been no changes in internal control over financial reporting during the year ended December 31, 2016 that have materially affected or are reasonably likely to materially affect that Company’s internal control over financial reporting.

Item  9B.  Other Information

None.





29


 

PART III

Item 10.  Directors, Executive Officers and Corporate Governance



BOARD OF DIRECTORS

The Company’s Board is comprised of five members:

Stephen D. Chesebro’

Appointed Director in October 2000

Age 75



Mr. Chesebro’ has served as the Chairman of the Board of the Company since 2001. From December 1998 until he retired in 1999, he served as President and Chief Executive Officer of PennzEnergy, the independent oil and gas exploration and production company that was formerly a business unit of Pennzoil Company. From February 1997 to December 1997, Mr. Chesebro’ served as Group Vice President – Oil and Gas and from December 1997 until December 1998 he served as President and Chief Operating Officer of Pennzoil Company, an integrated oil and gas company. From 1993 to 1996, Mr. Chesebro’ was Chairman and Chief Executive Officer of Tenneco Energy. Tenneco Energy was part of Tenneco, Inc., a worldwide corporation that owned diversified holdings in six major industries. Mr. Chesebro’ is an advisory director to Preng & Associates, an executive search consulting firm. In 1964, Mr. Chesebro’ graduated from the Colorado School of Mines. He was awarded the school’s Distinguished Achievement Medal in 1991 and received his honorary doctorate from the institution in 1998. He currently serves on the school’s visiting committee for petroleum engineering, and is a member of the Colorado School of Mines Foundation Board of Governors. In 1994, Mr. Chesebro’ was the first American awarded the H. E. Jones London Medal by the Institution of Gas Engineers, a British professional association. 



James A. Edmiston

Elected Director in May 2005

Age 57



Mr. Edmiston was elected President and Chief Executive Officer of the Company on October 1, 2005. He joined the Company as Executive Vice President and Chief Operating Officer on September 1, 2004. Prior to joining Harvest, Mr. Edmiston was with Conoco and ConocoPhillips for 22 years in various management positions including President, Dubai Petroleum Company (2002-2004), a ConocoPhillips affiliate company in the United Arab Emirates and General Manager, Petrozuata, C.A., in Puerto La Cruz, Venezuela (1999-2001). Prior to 1999, Mr. Edmiston also served as Vice President and General Manager of Conoco Russia and then as Asset Manager of Conoco’s South Texas Lobo Trend gas operations. From 2014-2015, Mr. Edmiston was on the board of Sonde Resources Corp. He earned a Bachelor of Science degree in Petroleum Engineering from Texas Tech University and a Masters of Business Administration from the Fuqua School of Business at Duke University. Mr. Edmiston was inducted into the Petroleum Engineering Academy and was recognized as a Distinguished Engineer by the Texas Tech College of Engineering in 2009. Mr. Edmiston is a Member of the Society of Petroleum Engineers.



Robert E. Irelan

Appointed Director in February 2008

Age 69



Mr. Irelan has over 45 years of experience in the oil and gas industry. He retired from Occidental Petroleum as Executive Vice President of Worldwide Operations in April 2004, having started there in 1998. Prior to Occidental Petroleum, Mr. Irelan held various positions at Conoco, Inc., from 1967 until 1998. Upon his retirement he opened his own company, Naleri Investments LLC. He also partnered in entrepreneurial ventures including BISS Product Development LLC    Mr. Irelan earned his Professional Engineering degree in Petroleum Engineering from Colorado School of Mines. He also has advanced studies in Mineral Economics. He was awarded the Distinguished Achievement Award from the school in 1998. 



Edgard Leal

Appointed Director in June 2015

Age 74



Since 2005 Mr. Leal has served as a director of Leal, Leal & Associados, an advisory service to Venezuelan companies and investor groups, and as managing director of Asesorias y Servicios Gaspetro, C.A., an advisory services company. From 1998 to 2006, Mr. Leal was Senior Associate of Cambridge Energy Research Associates, providing advisory services to Latin American oil and gas companies.  From 1980 to 2003, he was a director of Shipowners Mutual Protection and Indemnity, an insurance company. From 1998 to 2001, he was vice president of Banco Caracas, a private section bank in Venezuela. From 1994 to 1998, he was president of Centro de Aralisis y Negociacion – Internacional, C.A., providing advisory services to banks and other financial institutions in Venezuela.  From 1975 to 1994, he served as a director, president of Bariven and a managing director of Petroleos de Venezuela (PDVSA), managing the centralized finances for PDVSA.  From 1989 to 1990, Mr. Leal was the Commissioner of the President of Venezuela,

30


 

negotiating foreign commercial bank debt with international banks.  From 1969 to 1975, he was a Vice President of CitiBank, managing its credit and public sector lending in Venezuela.  From 1966 to 1975, Mr. Leal represented the Government of Venezuela in the Economic Commission of the Organization of Petroleum-Exporting Countries; from 1963 to 1966 he served as Assistant to the Minister Counselor for Petroleum Affairs in the Embassy of Venezuela in the United States, conducting discussions with the U.S. Department of Energy on the U.S. Oil Import Program. Mr. Leal received a Bachelor of Arts degree in Economics from Rollins College in 1962 and a Master of Arts degree in Economics from Catholic University of America in 1966.



Patrick M. Murray

Appointed Director in October 2000

Age 73



In 2007, Mr. Murray retired from Dresser, Inc. where he had been the Chairman of the Board and Chief Executive Officer since 2004. Dresser, Inc. is an energy infrastructure and oilfield products and services company. From 2000 until becoming Chairman of the Board, Mr. Murray served as President and Chief Executive Officer of Dresser, Inc. Mr. Murray was President of Halliburton Company’s Dresser Equipment Group, Inc.; Vice President, Strategic Initiatives of Dresser Industries, Inc.; and Vice President, Operations of Dresser, Inc. from 1996 to 2000. Mr. Murray has also served as the President of Sperry-Sun Drilling Services from 1988 through 1996. Mr. Murray joined NL Industries in 1973 as a Systems Application Consultant and served in a variety of increasingly senior management positions.  Mr. Murray is Chairman of the Board of C&J Energy Services and on the board of the World Affairs Council of Dallas Fort Worth.  He is on the board of advisors for the Maguire Energy Institute at the Edwin L. Cox School of Business, Southern Methodist University, and Chairman of the Board of Regents of Seton Hall University. Mr. Murray holds a B.S. degree in Accounting and a Master of Business Administration from Seton Hall University. He served for two years in the U.S. Army as a commissioned officer.



EXECUTIVE OFFICERS

The following table provides information regarding each of our executive officers.











 

 

 

 



 

 

 

 

Name

  

Age

 

Position

James A. Edmiston *

  

57

  

President and Chief Executive Officer

Stephen C. Haynes

  

60

  

Vice President, Finance, Chief Financial Officer and Treasurer

Keith L. Head

  

59

  

Vice President, General Counsel and Corporate Secretary

Karl L. Nesselrode

  

59

  

Vice President, Engineering & Business Development

Robert Speirs

  

61

  

Senior Vice President, Eastern Operations



*  See Mr. Edmiston’s biography above under “Board of Directors”.

Stephen C. Haynes has served as our Vice President, Chief Financial Officer and Treasurer since May 19, 2008. Mr. Haynes performed various financial consulting engagements from January 1, 2008 until his appointment with Harvest. Previously, he served as Chief Financial Officer for Cygnus Oil and Gas Corporation for the period February 1, 2006 through December 31, 2007. Before joining Cygnus, Mr. Haynes was the Corporate Controller with Carrizo Oil and Gas for the period January 1, 2005 through January 31, 2006. Mr. Haynes served as an independent consultant from March 2001 through end of 2004. From March 1990 through December 2000, Mr. Haynes served in a series of increasing responsibilities in international managerial and executive positions with British Gas, culminating in his appointments as Vice President-Finance of Atlantic LNG, a joint venture of British Gas and several industry partners in Trinidad and Tobago. Mr. Haynes is a Certified Public Accountant, holds a Master of Business Administration degree with a concentration in Finance from the University of Houston and a Bachelor of Business Administration degree in Accounting from Sam Houston State University. He also attended the Executive Development Program at Harvard University.



Keith L. Head has served as our Vice President, General Counsel and Corporate Secretary since May 7, 2007. He joined Texas Eastern upon graduation from law school and remained with the same organization through mergers with Panhandle Eastern, Duke Energy Corporation and Cinergy Corp. Mr. Head held various business development positions with Duke Energy Corporation from 1995 to 2001. His corporate development work included the identification, evaluation and negotiation of acquisitions in Latin America, North America and the United Kingdom. Mr. Head was Senior Vice President and General Counsel at Duke Energy North America from 2001 to 2004 and Associate General Counsel of Duke Energy Corporation from 2004 through December 2006. After leaving Duke Energy, Mr. Head joined Harvest in May 2007.  He is a board member of the Houston chapter of The General Counsel Forum and formerly served as president of the board for the Texas Accountants and Lawyers for the Arts.  Mr. Head holds a Bachelor of Science degree in Business Administration from the University of North Carolina. He received both a  Juris Doctorate and Masters in Business Administration from the University of Texas in 1983.

31


 

Karl L. Nesselrode has served as Vice President of the Company since November 17, 2003.  From August 2007 to August 2010, he accepted a long-term secondment to Petrodelta as its Operations and Technical Manager while remaining an officer of Harvest.  From February 2002 until November 2003, Mr. Nesselrode was President of Reserve Insights, LLC, a strategy and management consulting company for oil and gas.  He was employed with Anadarko Petroleum Corporation as Manager Minerals and Special Projects from July 2000 to February 2002.  Mr. Nesselrode served in various managerial positions with Union Pacific Resources Company from August 1979 to July 2000.  Mr. Nesselrode earned a Bachelor of Science in Petroleum Engineering from the University of Tulsa in 1979 and completed Harvard Business School Program for Management Development in 1995.

Robert Speirs has served as Senior Vice President, Eastern Operations since July of 2011. Prior to his promotion, his title had been Vice President, Eastern Operations since December 6, 2007. He joined Harvest in June 2006 as President and General Manager, Russia. Previously Mr. Speirs was President of Marathon Petroleum Russia and General Director of their wholly-owned subsidiary, KhantyMansciskNefte Gas Geologia from March 2004 through May 2006. Prior to joining Marathon, Mr. Speirs was Executive Vice President of YUKOS EP responsible for engineering and construction from June 2001. During both these periods, Mr. Speirs spent considerable time in West Siberia where he oversaw substantial increases in production at both companies. From November 1997 until March 2001, Mr. Speirs resided in Jakarta where he served as President of Premier Oil Indonesia. During this period, Premier was active in all phases of the upstream business, culminating in the commissioning of the West Natuna Gas Project. Prior to 1997, Mr. Speirs was with Conoco for 21 years in various leadership positions in the US, UK, Russia, Indonesia, Singapore and Dubai, UAE. Mr. Speirs earned a Bachelor of Science degree with honors in Engineering Science from the University of Edinburgh. He also attended the Executive Management Program at INSEAD.



CORPORATE GOVERNANCE



Audit Committee



Our Board of Directors has established a standing audit committee (the “Audit Committee”). The Audit Committee operates pursuant to a written charter. The charter is accessible in the Corporate Governance section of our website (http://www.harvestnr.com).



Mr. Murray, Mr. Leal and Mr. Robert Irelan serve on our Audit Committee.



The Audit Committee assists the Board in its oversight of our accounting and financial reporting policies and practices; the integrity of our financial statements; the independent registered public accounting firm’s qualifications, independence and objectivity; the performance of our internal audit function and our independent registered public accounting firm; and our compliance with legal and regulatory requirements.



The Audit Committee acts as a liaison between our independent registered public accounting firm and the Board, and it has the sole authority to appoint or replace the independent registered public accounting firm and to approve any non-audit relationship with the independent registered public accounting firm. Our internal audit function and the independent registered public accounting firm report directly to the Audit Committee.



Our Audit Committee has established procedures for our employees or consultants to make a confidential, anonymous complaint or raise a concern over accounting, internal accounting controls or auditing matters concerning us or any of our companies and is responsible for the proper implementation of such procedures. The Audit Committee is also responsible for understanding and assessing our processes and policies for communications with stockholders, institutional investors, analysts and brokers.



The Audit Committee has access to our records and employees, and has the sole authority to retain independent legal, accounting or other advisors for committee matters. We will provide appropriate funding for the payment of the independent registered public accounting firm and any advisors employed by the Audit Committee.



The Audit Committee makes regular reports to the Board. Each year the Audit Committee assesses the adequacy of its charter and conducts a self-assessment review to determine its effectiveness.



The Board has determined that each member of the Audit Committee meets the independence standards of the Securities and Exchange Commission’s (“SEC”) requirements, the rules of the New York Stock Exchange and the Company Guidelines for Corporate Governance. No member of the Audit Committee serves on the audit committee of more than three public companies. The Board has further determined that each member of the Audit Committee is financially literate and that Mr. Murray qualifies as an audit committee financial expert, as defined in Item 407(d)(5) of SEC Regulation S-K. Information on the relevant experience of Mr. Murray is set forth in “Board of Directors” above.



32


 

Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934, as amended, (“Section 16(a)”) requires our directors, executive officers and beneficial holders of more than 10 percent of our common stock to file reports with the SEC regarding their ownership and changes in ownership of our stock. Based solely upon our review of SEC Forms 3, 4 and 5 and any amendments thereto furnished to us, to our knowledge, during fiscal year 2016, our officers, directors and 10 percent stockholders complied with all Section 16(a) filing  requirements. In making this statement, we have relied upon the written representations of our directors and officers.



Code of Ethics



The Board has adopted a Code of Business Conduct and Ethics, which applies to all of our directors, officers and employees. The Board last amended the Code of Business Conduct and Ethics in December 2014. The Board has not granted any waivers to the Code of Business Conduct and Ethics.



The Guidelines for Corporate Governance, the Code of Business Conduct and Ethics and the charters of all the Board committees are accessible on our website under the Corporate Governance section at http://www.harvestnr.com. Any amendments to or waivers of the Code of Conduct and Business Ethics will also be posted on our website.



Item 11.  Executive Compensation



COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table



The following table summarizes the compensation of the Company’s named executive officers for the two most recently completed fiscal years ended December 31, 2016 and 2015.









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

Stock

 

Option

 

Incentive Plan

 

All Other

 

 

 

Name and Principal

 

 

 

 

 

 

 

Bonus

 

Awards

 

Awards

 

Compensation

 

Compensation

 

 

 

Position

 

Year

 

Salary ($)(1)

 

 

($) (2)

 

($) (3)

 

($) (4)

 

($) (5)

 

($) (6)

 

Total ($)(7)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James A. Edmiston

 

2016

 

$

588,000 

 

$

705,600 

 

$

 —

 

$

 —

 

$

 —

 

$

22,135 

 

$

1,315,735 

President and Chief

 

2015

 

 

610,616 

 

 

382,200 

 

 

285,000 

 

 

554,440 

 

 

214,550 

 

 

20,008 

 

 

2,066,814 

Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stephen C. Haynes

 

2016

 

$

314,000 

 

$

226,080 

 

$

 —

 

$

 —

 

$

 —

 

$

19,003 

 

$

559,083 

Vice President, Finance,

 

2015

 

 

326,077 

 

 

122,460 

 

 

95,190 

 

 

193,735 

 

 

63,315 

 

 

17,255 

 

 

818,032 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and Treasurer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Speirs

 

2016

 

$

370,000 

 

$

266,400 

 

$

 —

 

$

 —

 

$

 —

 

$

501,996 

 

$

1,138,396 

Senior Vice President

 

2015

 

 

370,000 

 

 

144,300 

 

 

112,290 

 

 

228,218 

 

 

74,592 

 

 

488,912 

 

 

1,418,312 

Eastern Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



(1)

There have been no salary increases since 2014.  In 2015, for Mr. Edmiston and Mr. Haynes, there was one extra pay period which is reflected in the table.

(2)

Harvest pays bonuses one year in arrears but reflects the bonus in the table above in the year to which it related.  Bonuses related to 2015 were paid October 14, 2016 and are reflected in the schedule above as 2015 bonuses.  Bonuses related to 2016 were paid January 13, 2017 and are reflected in the above schedule as 2016 bonuses.

(3)

In 2015, Harvest issued restricted stock units to employees and the named executive officers. The fair value of each restricted stock unit ("RSUs") was estimated on the date of grant using a Monte Carlo simulation since the RSUs were also subject to a market condition.  On October 7, 2016, with the sale of Harvest Holding, these awards vested.

(4)

In 2015, the fair value of each stock option was estimated on the date of grant using a Monte Carlo simulation since the options were also subject to a market condition.  On October 7, 2016, all options vested with the sale of Harvest Holding.

(5)

In 2015, Harvest issued stock appreciation rights ("SARs").  These SARs vested on October 7, 2016 with the sale of Harvest Holding.   The SARs can be settled in cash or equity.  Currently, no plan has been approved by the shareholders for equity settlement and Harvest is recording the liability and expense associated with the awards based on the fair value of the awards.

(6)

The table below summarizes all other compensation of the Company’s named executive officers for the two most recently completed fiscal years ended December 31, 2016 and 2015.

33


 

















 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and Principal Position

 

Year

 

Group Term Life

 

Company 401(k) Match

 

Foreign Housing and Living Expense

 

Cost of Living  Adjustment

 

Vacation Allowance

 

Transportation Allowance

 

Foreign Service Premium

 

Foreign Taxes

 

Total ($)



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

James A. Edmiston

 

2016

 

$

11,535 

 

$

10,600 

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

22,135 

President and Chief

 

2015

 

 

9,408 

 

 

10,600 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

20,008 

Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stephen C. Haynes

 

2016

 

$

8,403 

 

$

10,600 

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

19,003 

Vice President, Finance

 

2015

 

 

6,655 

 

 

10,600 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

17,255 

Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and Treasurer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Speirs

 

2016

 

$

1,980 

 

$

 —

 

$

158,112 

 

$

83,657 

 

$

44,899 

 

$

31,541 

 

$

28,500 

 

$

153,307 

 

$

501,996 

Senior Vice President

 

2015

 

 

1,980 

 

 

 —

 

 

156,325 

 

 

83,464 

 

 

44,281 

 

 

33,661 

 

 

28,500 

 

 

140,701 

 

 

488,912 

Eastern Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7)

The named executive officer’s compensation reflected in this Summary Compensation Table reflects the principal components of their respective employment agreements and are designed to reward the executive’s contributions.  These components include base salary which is paid in cash based on market and peer benchmarking data; Annual performance bonus paid in cash and based on corporate and individual performance indices; Long term incentive awards in the form of stock, options, and stock appreciation rights; and personal benefits which include health and welfare benefits, 401K contributions, and group and supplemental executive life policies.  The Company does not provide a pension plan or non-qualified deferred compensation plans for these executives or employees.

Narrative Explanation of Summary Compensation Table

Our compensation program components are designed to reward executive officers’ contributions, while considering our specific operating situation and how they manage this situation consistent with our strategy. Factors considered in compensating our executives include individual experience, skill sets that are required for multi-national oil and gas operations and their proven record of performance.   The principal components of compensation and their purposes for executive officers are:







 

 

 

 



 

 

 

 

Element

 

Form of Compensation

 

Purpose

Base salary

 

Cash

 

Provide competitive, fixed compensation to attract and retain executive talent

Annual performance based incentive awards

 

Cash

 

Create strong financial incentive for achieving financial and strategic successes

Long-term incentive compensation

 

Stock Options, SARs, RSUs and Restricted Stock Grants

 

Provides alignment between executive and shareholder interests by rewarding executives for performance based on appreciation in the Company's share price and retains executives

Personal benefits

 

Eligibility to participate in plans extends to all employees

 

Broad-based employee benefits for health and welfare and retirement

34


 

Base Salary

We pay base salaries to our executive officers to compensate them for specific job responsibilities during the calendar year. In determining base salaries for our executive officers, the Human Resources Committee (the “HR Committee”) considers market and competitive benchmark data for the executive’s level of responsibility targeting between the 50th and 75th percentile of executive officers in comparable companies, with variation based on individual executive skill sets.

Based on our current financial situation, the HRCommittee did not recommend salary increases in 2017 for the named executive officers.





 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

Base Salary-Annualized

 

Edmiston

 

Speirs

 

Haynes

2015

 

$

588,000 

 

$

370,000 

 

$

314,000 

2016

 

$

588,000 

 

$

370,000 

 

$

314,000 

Annual Performance-Based Incentive Awards (Bonus)

Each year, in addition to individual performance objectives, the HR Committee establishes Company performance measures for determining annual incentive awards as follows:



·

Total Shareholder Return (weight 60%)

·

Reserve Additions/Production/Estimated Market Value (EMV) (weight 30%)

·

Social Responsibility and Governance (including safety) (weight 10%)



These measures and their weightings are reviewed and modified, if appropriate, in light of changing Company priorities and strategic objectives. The corporate targets and weightings are recommended by the CEO and reviewed and approved by the HR Committee. The HR Committee focuses on these corporate goals in evaluating Company performance for the purpose of compensation. Individual performance results of the named executive officers are measured and assessed by the CEO.



Individual performance and operational results are combined with the Company performance results and weighted equally to determine each executive’s final annual incentive award. Target award levels for annual incentives are set at 100% of base salary for the CEO and 60% of base salary for the other named executive officers. For 2015 performance, the CEO and the other named executive officer’s individual awards were eligible for 65% of their bonus targets.   For 2016 performance, the CEO and the other named executive officer’s individual awards were eligible for 120% of their bonus targets.

Long-Term Incentive Compensation



Long-term incentive awards have been granted under our 2001, 2004, 2006 and 2010 Long Term Incentive Plans (“LTIPs”), and the awards are granted to our executive officers to align their personal financial interests with our stockholders. The LTIPs include provisions for stock options, SARs, restricted stock, RSUs and cash awards.



Our policy on stock awards is focused on determining the right mix of retention and ownership requirements to drive and motivate our executive officers’ behavior consistent with long-term interests of stockholders. The HR Committee is the administrator of our LTIPs and, subject to Board of Director approval, has full power to determine the size of awards to our executives, to determine the terms and conditions of grants in a manner consistent with the LTIPs, and to amend the terms and conditions of any outstanding award.



The CEO presents individual stock award recommendations for executive officers to the HR Committee, and after review and discussion the HR Committee submits their recommendation to the Board of Directors for approval. The HR Committee’s policy is to grant awards on the date the Board of Directors approves them. Stock options, stock appreciation rights, restricted stock and/or restricted stock units will be granted once each calendar year on a predetermined date or at the effective date of a new hire or promotion, but not within six months of a previous award to the same individual. The price of options and the value of a restricted stock award issued to a new employee will be set at the closing price on the employee’s effective start date. The price of options and the value of a restricted stock award issued to an employee as a result of a promotion will be set at the closing price on the effective date of that promotion. Under no circumstances will a grant date be set retroactively.



The Board of Directors has adopted stock retention guidelines as an additional means to promote ownership of stock by executive officers and directors. The guidelines apply to any award of restricted stock or options to purchase our stock granted to executive officers and directors after February 2004. Under these guidelines, an executive officer or director must retain at least 50 percent of the shares of restricted stock for at least three years after the restriction lapses. Consequences for failure to adhere to these guidelines shall be determined by the HR Committee in its discretion including, without limitation, actions with respect to future compensation, and future grants of stock options or restricted stock and performance measures. Under our Insider Trading Policy,

35


 

executive officers and directors are strictly prohibited from speculative trading including short sales and buying or selling puts or calls on the Company’s securities.



We believe the Company should have the ability to recover compensation paid to executive officers and key employees under certain circumstances.  On May 20, 2010, our stockholders approved the 2010 Long-Term Incentive Plan (the “2010 Plan”). This 2010 Plan allows us to recover any award which the Company deems was not warranted after any restatement of corporate performance.



The long-term incentive awards for 2015 included stock options, stock appreciation rights and restricted stock units. Stock appreciation rights can be settled as cash or equity.  This mix provides upside potential with the stock options/SARs and a more stable award in the form of restricted stock units.  Of the total award value, 70 percent was allocated to options and SARs and 30 percent to restricted stock units based on available shares. There were no long term incentives awards granted in 2016.  



Personal Benefits



Our executive officers are covered under the same health and welfare and retirement plans, including our 401(k) plan, as all employees. The executive officers also receive supplemental life insurance to cover the risks of extensive travel required in conducting our global business. We pay 100 percent of all premiums for the following benefits for employees and their eligible dependents:



·

All employees are entitled to a medical benefit with unlimited maximum lifetime benefits, with an annual out-of-pocket deductible of $3,000 per individual and $9,000 per family.

·

Life and accidental death and dismemberment (“AD&D”) insurance equal to two times annual salary with a minimum of $200,000 and a cap of $300,000 (or $400,000 with evidence of insurability).  Also, there is additional coverage equal to five times annual salary ($1.0 million maximum) while traveling outside their home country on Company business.

·

Long-term disability benefits provide a monthly benefit of 60 percent of base salary up to a maximum of $10,000 per month.

·

Participation in our Statutory Profit Sharing Plan 401(k). Eligibility is effective the first day of the month following the date of hire. We use a safe harbor matching formula for Company contributions (dollar for dollar match up to 3 percent of pay, $0.50 for every dollar on the next 2 percent of pay subject to the statutory maximum salary limits). Participant and Company contributions are 100 percent vested from the date of contribution. At termination of employment, employees are eligible to receive their account balance in a lump sum.

·

All employees and their dependents receive annual dental and vision care benefits of $1,500 and $250, respectively, per employee and dependents.

 

 

 

 



We do not offer a pension plan or a non-qualified deferred compensation plan for executive officers or employees. We did not offer perquisites to executive officers or other employees in either 2015 or 2016. We offer relocation and foreign service premiums to employees serving in an international location. The amount of the premium will vary depending upon the living conditions, political situation and general safety conditions of the international location. Expatriate employees are also provided housing and utilities allowances where applicable. They also receive a cost of living allowance to cover the differential between normal living expenses in the host and home countries, and will continue to participate in the employee benefit plans available to home country employees.





36


 

Outstanding Equity Awards at Fiscal Year End

The following table shows information concerning outstanding equity awards as of December 31, 2016 held by the named executive officers.



















 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Option Awards

 

Stock Awards



 

Number of Securities Underlying Unexercised Options (#)

 

Equity Incentive Plan Number of Securities Underlying Unexercised Unearned Options

 

Option Exercise Price

 

Option Expiration

 

Number of Shares or Units of Stock That Have Not Vested

 

Market Value of Shares or Units of  Stock That Have Not Vested

 

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

 

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

Name

 

Exercisable

 

Unexercisable

 

(#)

 

($)

 

Date

 

(#)

 

($)

 

(#)

 

($)

James A. Edmiston

 

32,500 

 

 —

 

 

 

$

20.480 

 

5/17/2017

 

 

 

 

 

 

 

 

 



 

93,250 

 

 —

 

 

 

$

19.200 

 

7/17/2018

 

 

 

 

 

 

 

 

 



 

64,750 

 

 —

 

 

 

$

19.040 

 

5/21/2019

 

 

 

 

 

 

 

 

 



 

250,000 

 

 —

 

 

 

$

4.520 

 

7/22/2020

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stephen Haynes

 

9,250 

 

 —

 

 

 

$

20.480 

 

5/17/2017

 

 

 

 

 

 

 

 

 



 

26,750 

 

 —

 

 

 

$

19.200 

 

7/17/2018

 

 

 

 

 

 

 

 

 



 

21,000 

 

 —

 

 

 

$

19.040 

 

5/21/2019

 

 

 

 

 

 

 

 

 



 

128,838 

 

 —

 

 

 

$

4.520 

 

7/22/2020

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Speirs

 

10,750 

 

 —

 

 

 

$

20.480 

 

5/17/2017

 

 

 

 

 

 

 

 

 



 

31,500 

 

 —

 

 

 

$

19.200 

 

7/17/2018

 

 

 

 

 

 

 

 

 



 

24,750 

 

 —