Harvest Natural Resources First Quarter 2012 Operational Update

Budong-Budong PSC - Indonesia

The license commitments have been fulfilled and the partners are planning to request a four year extension at the end of the initial six year term which expires on January 16, 2013.  Prospects and leads are being matured for both the Lariang and Karama Basins.  An exploration well is being planned for 2013.

Tately Budong-Budong N.V. is the operator of the Budong-Budong Block.  Harvest owns a 64.4 percent working interest in the Budong-Budong PSC.

Oman Block 64 EPSA

All work commitments have been completed and post well studies are being conducted.  A one year extension for the license has been granted until May 2013, at which time Harvest must decide whether to commit to the second phase of the license, which has a 3 year term.  

Harvest has an 80 percent interest in Block 64 onshore Oman.  Block 64 has an area of 3,874 square kilometers and was extracted from a pre-existing block (PDO's Block 6) to accelerate exploration for gas and gas condensate by the Omani Ministry of Oil and Gas.  Harvest is evaluating other opportunities in the region.

Corporate

On March 8, 2012, HNR entered into exchange agreements with certain existing noteholders of its 8.25% senior convertible notes pursuant to which such noteholders agreed to exchange $15,984,000 principal amount of the notes for 2,875,357 shares of common stock, resulting in an effective exchange price of $5.56 per share.  In addition, in lieu of cash, HNR agreed to issue to the noteholders 161,603 shares of common stock at $8.16 per share in exchange for foregoing a one year interest make-whole of $1,318,680.  After giving effect to the exchange, approximately $15,550,000 principal amount of the notes remain outstanding.  The exchange closed on March 14, 2012.

On March 30, 2012 HNR entered into an equity distribution agreement with Knight Capital America, L.P., a subsidiary of Knight Capital Group, Inc., relating to an ATM offering of shares of our common stock having an aggregate sales price of up to $75,000,000.  Under the terms of the agreement, Harvest may offer and sell shares of its common stock by means of transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to the prevailing market price or at negotiated rates.  Harvest is unable to access the ATM facility during blackout periods or when the Company is in possession of material information which has not been made public. 

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