Harvest Natural Resources, Inc. (HNR)

Valuation, and new reserves

Very low P/E, should have nice growth next year..
Current year total EPS estimate: .21
Next Year total EPS estimate: .96
Making current P/E 26
forward p/e 5.7

Outperform, 5 years and MORE

This one is for my old days. I will sell it at the Peak, just when the Oil World War will trigger

I'm making big plays on these intermediary energy companies. I'm buying them now that oil/energy is at lows.

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.

Too Cheap

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

To quote Morgan Housel "Harvest is priced as if oil will stay low forever (it won't) and Chavez has already booted it out of Venezuela (he hasn't, and likely won't). Moreover, I'm thoroughly convinced the big investing story of the next few years will be a renewed commodity surge as the trillions of dollars printed to fund financial bailouts undermine the dollar. Some see potential to exploit this opportunity with gold; I see it in a commodity currently beaten down to ridiculously low levels: oil."

expansive gains to come on oil upswing

a

P/E is 3.27, down on Venezuelan asset losses, but WAY oversold, even if Venezuelan assets are lost. This is a steal at $5/share. Should be a three bagger if oil ever goes to $60/bbl again, and do you really doubt that it will get there again sooner than later?

Discount to NCAV

Been waiting for this to come back down.

HNR represents a compelling opportunity to invest in an asset and cash rich company that can easily double in the course of the next year, with the potential to triple over the next couple. At today's price this business trades at an enormous discount to its current NAV despite the waterfall of revenue soon to fall strait to the bottom line, and should provide outstanding risk-adjusted returns with minimal downside for patient long term investors. Current concern over the potential nationalization of it's venezuelan assets is overdone, and more than reflected in today's price.

This company has numerous levers at its disposal to drive returns. A few of these levers include...

A production ramp (of roughly 25%) - over the next 12 months that should produce marginal revenue yielding high cashflow as most of the revenue increase will fall strait to the bottom line. Over the next year HNR's profit generating capabilities should get considerably stronger.

Potential asset sale's - are another strong lever that would likely unlock significant shareholder value. If completed at prices commensurate with the recent Petrofalcon/Anadarko transaction, the stock would likely double. The sale of the entire company due to the stark discount between public and private market values is another possible outcome

Potential buybacks - which if executed at these levels would be enormously accretive, further juicing returns.

In conclusion...

With more than $5 in net cash (currently nearly 50% of its market cap) sitting in the US, investors are effectively paying $4 for $16 (a very conservative estimate) of HNR's current VZ assets, which in and of itself provides serious downside protection. New fields in Venezuela and the other exploratory projects are not included here, and are likely to provide additional upside optionality. Head's I win, Tails I don't lose much

Simple PE Middle High low, Energy Asume good, Reality I'm Beating S&P Real life With to basics. Less than %60 52 week high, Pe low as you can go.

Marginal Revenue will yield high cashflow. Big discount to true asset value with nice upside due to moonshot exploration. Manageable if ot limited downside, even if assets are nationalized there will likely be some kind of compromise.

When certain sectors are having a nice run, many times we forget where the main growth lies. Even with the markets on a downturn there are still plenty of areas that are in the middle of a bull run. Commodity markets across the board are being hit with demand that is inflating all of their prices. One of the commodities that have had a huge run is oil. It has more than doubled in 52 weeks and looks as though it could hit $120 soon. There is not knowing when the markets will run out of steam and it is better to trade the short term as markets whether up or down are trading quite quickly. With the nice run on oil and a most certain increase in natural gas prices as they are trading way out of the historical range with respect to oil, some of the smaller exploration and production companies do look good on a value basis.

Not only does HNR have the probability some huge returns it doesn't carry the risk that many... More When certain sectors are having a nice run, many times we forget where the main growth lies. Even with the markets on a downturn there are still plenty of areas that are in the middle of a bull run. Commodity markets across the board are being hit with demand that is inflating all of their prices. One of the commodities that have had a huge run is oil. It has more than doubled in 52 weeks and looks as though it could hit $120 soon. There is not knowing when the markets will run out of steam and it is better to trade the short term as markets whether up or down are trading quite quickly. With the nice run on oil and a most certain increase in natural gas prices as they are trading way out of the historical range with respect to oil, some of the smaller exploration and production companies do look good on a value basis.

Not only does HNR have the probability some huge returns it doesn't carry the risk that many others do. Currently, HNR has traded into a range with respect to chart price that looks ready for a move. Over the past couple of years, it has been doing this because the PE ratio has been so high, but now the market seems to have missed something here, as it has become a great value. There is not way to know when this chart will break upward, but in my estimates I have HNR breaking out within the next four to eight months. The reason for this is that there is a phenomenal growth potential with this company and it is not tied to the price of oil and gas.

Their Petrodelta resource base has 5.9 million barrels OOIP. This field is 32% owned by HNR. Proved net income on this asset is $617 million and possible another $792 million. This number is derived by a Venezuelan oil price of under $46 a barrel. They are also increasing their organic growth by bringing old wells on line. There current rig drilling program is aggressive as two more are being bid. They are looking to add current reserves through exploration and decrease cost going forward. They have recently converted their rigs and it looks like production could increase over 25% this year. Their El Salto exploration looks to have 3.7 million barrels of oil and it could easily double that once they get the new areas drilled.

Their current exploration in Indonesia looks to take years for expansion, but has proven hydrocarbons in place. This phase looks to have a 2 to 3 year outlook. They are looking to drill 2 exploration wells with a cost of .57 a share in 2008. They also have an exploration area off of Gabon. This also has proven hydrocarbons with a pre-existing well. Their 50% interest will cost .17 a share in exploration.

Looking at existing timelines with respect to possible production and knowledge of new possible drilling areas, it is seen the petrodelta has two rigs going by the first half of this year. They have two new fields in the third quarter and six in the fourth getting started. One new well will be operational in the first quarter of 2009. All of this could increase reserves substantially and will certainly increase production by 2009. They currently have $164 million in cash and $67 million in debt leaving a considerable amount to fund current exploration. They are sure enough that they have started a $50 million dollar repurchasing plan and have repurchased 3.1 million shares as the end of last year.

Current share price does not hold the current reserves getting ready for production. These systems will be brought into production at a very low expense to the company. Most importantly they have done a nice job of delivering on these large projects and should continue to do so going forward. Since 1992 they have increased oil recovery by 220%. Statistically they should have an additional 700 million barrels of oil recovered if their 13% recovery holds up, but with every 1% increase it adds an additional 100 million barrels of oil by projection.

This current year, revenue should increase by 1000%. Next year looks to add over 30% by analyst's estimates. They put themselves on the board during their last earnings session. They posted earnings of .84 per share while estimates were at -.07. That is a difference of 1300%. The past five years the company has grown over 78% a year and their current PE is just over 8. One more earnings hit and they could move the stock above $14 and at that point the sky is the limit. Great long term play, while short term looks excellent as their stock price moves all over the place. Look to good news going forward.

Weekly and Daily Stochastics oversold.