Harvest Natural Resources, Inc. (NYSE:HNR)

natural gas is hot

HNR has gone down too far. A good entry point here at this price. (Dec 2011)

Definitely a risk play if i ever saw one. The good: The oil slump, bad cash flow, and disappointing earnings have combined to push the price of HNR under its book value. Current estimates put next years EPS almost doubling over this years estimate.

The Bad: HNR currently operates 6 fields in venezuela. Harvest's 1/3 stake after royalties puts its proven reserves at 61.7 million barrels of oil and 51.1 Billion cubic feet of Nat Gas. The fear is that the current trend of nationalization will continue and that on a whim, Hugo will outright take those fields and shareholders will get nothing. I have a feeling that you want to take the other side of that bet and here's why.

First we don't know how long Hugo will be able to wield absolute power. Venezuela has the highest rate of inflation in Latin America. It's capital has the highest murder rate of any city outside of a war zone on the planet. And as Hugo's health and political monopoly weakens, the coalition of opposition parties grows stronger.

Second Hugo needs HNR more than HNR needs Hugo. Three of the oil fields operated by HNR were abandoned in the 80's (most likely because they were thought to be depleted, but i can't confirm). In the past 20 years, Western drilling companies have been using their technology to breath new life into "depleted" wells (this was a big part of the energy boom in russia after the cold war ended). Venezuela's industry and workforce doesn't have the technology or the expertise to operate the technology to extract the oil and nat gas from these wells themselves. Additionally, HNR only owns a minority stake in these wells (about 1/3 after royalties). I would agree that Hugo is stupid, but even stupid has its limits.

Third, HNR owns wells in North America, Africa, and Asia. And after the recent HK buyout, HNR has been identified as a possible takeover candidate. Analyst estimates put the value of HNR at upwards of $20. This is definitely a much riskier play than HK was, but at $9.50 the upside is also much greater.

Overestimated Earnings Growth

Waiting for $12.30-60 area. Stock currently in down trend, but is undervalued at these price levels. I would put a half-position on here. Then the next lot around the above price levels. Analysts targets are north of $17

low PEG, strong price uptrend

good fundamentals

ratings were high .

slow but sure

rb

It seems like a takeover candidate by some company.

It's a bit of a risky play, but Chavez can't keep stealing assets from companies if it truly wants to better his country. If HNR can stay on favorable terms and unlock all the value in its PetroDelta partnership, the stock will be a winner.

Mohnish Pobrai pick trading around book value with a call on oil's upside and shifting regulations benefitting land-based oil reserves, which HNR might have in spades compared to a market cap of $274m.

oil will not let down for a long long time

While many oil companies surged in 2009, Harvest Natural Resources (NYSE:HNR) looks incredibly cheap on a host of levels. Shares fetch at $5.26 while the balance sheet is debt free and contains nearly $1.50 per share in cash. The company has a rich reserve base, with proven reserves equally to nearly twice the market cap.

HNR is grossly mispriced due to excessive concerns about political risk in Ven. Stunning reserve valuations are being overlooked, as well as significant production ramp that is coming. Nevertheless, HNR is diversifying out of Ven and has a series of high impact, company maker plays they are just about to drill.

Yeah, its balance sheet looks good, but there's significant political risk here, significant downside in oil prices if we face an extended recession, and the company's been burning cash the last three fiscal years.

The facts about HNR have already been stated by others who know far more then me.

looks like a gem to me at this price...