Harvest Secures Funds Through an Offering

Harvest Natural Resources (HNR), Inc. put up for sale a $79.8 million aggregate principal amount of 11% senior unsecured notes due October 11, 2014, and warrants to purchase up to 686,761 shares of its common stock with an exercise price of $10.00 per share. The warrants can be exercised at any time up until the three-year anniversary of the closing. If all of the warrants were exercised, the impact on dilution of the common shares outstanding would be 1.8%. The notes and warrants were issued in a private placement only to accredited investors.

The HNR notes were issued at a price of 96% of principal amount. The warrants will be issued to the purchaser of each note in an amount equivalent to 8% of the value of the notes. The purchase price of the notes was paid in cash, except for approximately $10.5 million in principal amount, which was exchanged by a single purchaser for a combination of approximately $6.0 million in face value of that purchaser's existing 8.25% senior convertible notes issued by the Company in 2010 and the value agreed to by the company and the noteholder, that otherwise would have been attained by the noteholder had the noteholder converted the note into 1,059,751 shares of common stock; the remaining $2.9 million in face value of that convertible note will be converted into shares of common stock under the terms of the indenture governing that convertible note.

The net cash proceeds of the offering, some $63.2 million, will be used to fund capital expenditures planned for Gabon and other potential projects, for working capital needs, and general corporate purposes.