Why Harvest Natural's Shares Crashed Today

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Harvest Natural Resources (NYSE: HNR  ) fell 40% today after the sale of a major asset fell through.

So what: A $725 million sale of Harvest's stake in Venezuelan energy interests to Indonesian government owned PT Pertamina collapsed. The government of Indonesia rejected the transaction after it looked as if Venezuela had opened the door to closing the deal just last week.  

Now what: Harvest had expected about $525 million in proceeds from the deal, and with a market cap of less than half that amount, this is clearly terrible news. The company is now back to square one, trying to figure out what to do with this asset it can't develop itself. Keep an eye on management's moves going forward. The company clearly has a good asset but not a lot of ways to exploit it right now.

Interested in more info on Harvest Natural Resources? Add it to your watchlist by clicking here.

Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On February 21, 2013, at 7:47 AM, EllenBrandtPhD wrote:

    While it's disappointing, Pertamina's delays had frustrated shareholders way too long. And since Venezuela NEEDS these assets developed as quickly as possible, maybe this will spur them to be more cooperative with the next entrant.

    One thing the bid did was establish a fair - though Lowball, actually - price for Petrodelta. With good results coming through in Gabon and the potentially very valuable South China Sea block still on the books at near zero, the overall company valuation is increasing, not otherwise.

    If Harvest management now decides it wants to sell the whole shebang, all it needs to do is issue a press release saying it has retained This That or The Other Investment Bank to "explore strategic alternatives" - and the stock is right back where it was a couple of days ago.

    Seeming overreaction yesterday is what happens when you have a gung ho remaining 15 percent Short position who can't be faulted for trying hard.

    We suspect the primary Institutional Holders on the Long side - most of whom are very smart and very experienced - will be staying put and advising management on what they want them to do.

  • Report this Comment On February 23, 2013, at 10:53 AM, EllenBrandtPhD wrote:

    Absolutely astounding commentary from Pertamina on why the deal fell through - putting all the blame on Venezuela and strongly implying that things could still be patched up IF . . .

    What this statement essentially does is confirm the original valuation for Petrodelta, so long as there is no interference from Venezuela.

    Add in the recent news on Gabon, and it is clear that this time, the "greedy pigs" in this stock have been on the Short side.

    They took it to the limit way too far, and they will now have to give up at least a couple of points to the Longs.

    Meanwhile, Venezuela apparently just held an emergency cabinet meeting at Chavez's bedside. One suspects that Pdvsa matters were on the agenda.

    Venezuela NEEDS to develop Petrodelta, which means they NEED to allow Harvest to either sell their stake or bring in a powerful new parent to back them.

    If Pertamina doesn't suit them, bring in the Indians or the Russians or somebody else.

  • Report this Comment On March 19, 2013, at 9:16 AM, naughtyguy wrote:

    They need to restate some of their previous accounting. The shorts are having a happy day!

    When the smoke clears...who knows where this stock will be. Class action suits will be the next news.

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