Note 5 – Dispositions

Share Purchase Agreement

On December 16, 2013, Harvest and HNR Energia entered into the Share Purchase Agreement with Petroandina and Pluspetrol, its parent, to sell all of our 80 percent equity interest in Harvest Holding to Petroandina in two closings for an aggregate cash purchase price of $400 million. The first closing occurred on December 16, 2013 contemporaneously with the signing of the Share Purchase Agreement, when we sold a 29 percent equity interest in Harvest Holding for $125 million. This first transaction resulted in a loss on the sale of the interest in Harvest Holding of $23.0 million in the year ended December 31, 2013. As a result of this first sale, we indirectly own 51 percent of Harvest Holding beginning December 16, 2013 and the noncontrolling interest owners hold the remaining 49 percent with Petroandina having 29 percent and Vinccler continuing to own 20 percent. We will continue to consolidate Harvest Holding’s results until the sale of the remaining 51 percent interest has been completed. The second closing, for the sale of a 51 percent equity interest in Harvest Holding for a cash purchase price of $275 million, will be subject to, among other things, approval by the holders of a majority of our common stock and approval by the Ministerio del Poder Popular de Petroleo y Mineria representing the Government of Venezuela (which indirectly owns the other 60 percent interest in Petrodelta).

HNR Energia and Petroandina also entered into a Shareholders’ Agreement (the “Shareholders’ Agreement”) on December 16, 2013, regarding the shares of Harvest Holding. The Shareholders’ Agreement becomes effective upon any termination of the Share Purchase Agreement before the second closing of the sale of the remaining shares of Harvest Holding.

The Share Purchase Agreement provides for certain put/call rights and termination payments under certain circumstances. If the Share Purchase Agreement is terminated because of the failure to obtain authorization by our stockholders, we will be required to pay Petroandina a fee of $3.0 million, and Petroandina will have the right to sell back to HNR Energia its 29 percent interest in Harvest Holding. If we terminate the Share Purchase Agreement and accept a superior proposal, we must pay Petroandina a break-up fee equal to $9.6 million and Petroandina has the right to sell back to HNR Energia, and HNR Energia has the right to cause Petroandina to sell back to HNR Energia, its interest in Harvest Holding. We must also pay the reasonable out-of-pocket expenses of Petroandina incurred in connection with the Share Purchase Agreement, up to $4 million, if the Share Purchase Agreement is terminated as a result of our breach of a representation or warranty or covenant, and in certain instances Petroandina also has the right and option to sell to HNR Energia its 29 percent interest. HNR Energia has the right and option to purchase from Petroandina its 29 percent interest in Harvest Holding on termination of the Share Purchase Agreement in certain other circumstances. Harvest has guaranteed HNR Energia’s obligations under the Share Purchase Agreement and the Shareholders’ Agreement.

During the term of the Share Purchase Agreement, Harvest Holding may not pay any dividends to HNR Energia, and therefore would not benefit from any dividends paid by Petrodelta during this period.

Discontinued Operations

As a result of the decision to not request an extension of the First Phase or enter the Second Phase of the Exploration and Production Sharing Agreement (“EPSA”) Al Ghubar / Qarn Alam license (“Block 64 EPSA”), Block 64 was relinquished effective May 23, 2013. The carrying value of Block 64 EPSA of $6.4 million was considered impaired and a related impairment expense was recorded during the year ended December 31, 2012. Operations in Oman were terminated, and the field office was closed May 31, 2013. We have no continuing operations in Oman.

In February 2013, we signed farm-out agreements on Block VSM14 and Block VSM15 in Colombia. Under the terms of the farm-out agreements, we had a 75 percent beneficial working interest and our partners had a 25 percent carried interest for the minimum exploratory work commitments on each block. We requested the legal assignment of the interest by the Agencia Nacional de Hidrocarburos (“ANH”), Colombia’s oil and gas regulatory authority, and approval of us as operator.

We have received notices of default from our partners for failing to comply with certain terms of the farmout agreements for Block VSM 14 and Block VSM 15, followed by notices of termination on November 27, 2013. As discussed further in Note 13 — Commitments and Contingencies, our partners have filed for arbitration of claims related to these agreements. We have accrued $2.0 million as of December 31, 2013 related to this matter. After evaluating these circumstances, we determined that it was appropriate to fully impair the costs associated with these interests, and we recorded an impairment charge of $3.2 million during the year ended December 31, 2013. As we no longer have any interests in Colombia, we have reflected the results in discontinued operations.

On May 17, 2011, we closed the transaction to sell the Antelope Project. The sale had an effective date of March 1, 2011. We received cash proceeds of approximately $217.8 million which reflects increases to the purchase price for customary adjustments and deductions for transaction related costs. We do not have any continuing involvement with the Antelope Project. The related gain on the sale was reported in discontinued operations in the second quarter of 2011.

During the year ended December 31, 2012, we incurred $0.1 million of expense related to settlement of royalty payments to the Mineral Management Services, write-offs of $5.2 million of accounts and note receivable and $3.6 million of accounts payable, carry obligation related to the settlement of all outstanding claims with a private third party on the Antelope Project. The note receivable related to a prospect leasing cost financing arrangement. The note receivable plus accrued interest was approximately $3.3 million at December 31, 2011, and was secured by a portion of the production from the Bar F #1-20-3-2 in Utah.

Oman operations, Colombia operations and the Antelope Project have been classified as discontinued operations. Revenue and income (loss) are shown in the table below:


	Year Ended December 31,
	2013			2012			2011
				(in thousands)
Revenue applicable to discontinued operations:
Oman	$	0		$	0		$	0
Colombia		0			0			0
Antelope Project		0			0			6,488

	$	0		$	0		$	6,488

Income (loss) from discontinued operations:
Oman	$	(674	)	$	(12,711	)	$	(11,371	)
Colombia		(4,476	)		0			0
Antelope Project		0			(1,699	)		97,616

	$	(5,150	)	$	(14,410	)	$	86,245