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NEWS RELEASE TRANSMITTED BY Marketwire

Harvest Operations Announces Year End 2010 Reserves

Feb 28, 2011 - 13:01 ET

CALGARY, ALBERTA--(Marketwire - Feb. 28, 2011) - Harvest Operations Corp. ("Harvest") (TSX:HTE.DB.D) (TSX:HTE.DB.E) (TSX:HTE.DB.F) and (TSX:HTE.DB.G) today announces a summary of its 2010 year end reserves information. Unless otherwise indicated, all reserves stated herein are gross reserves (before royalty burdens and without including royalty interests), based on forecast prices and costs, except where indicated.

HIGHLIGHTS OF HARVEST'S RESERVES:

  • Harvest's gross Proved plus Probable ("P+P") reserves increased 461% from year end 2009 to 461.3 million barrels of oil equivalent ("mmboe") including Harvest's BlackGold oil sands project ("BlackGold"). Gross Proved reserves increased 237% to 237.9 mmboe
  • P+P Finding Development and Acquisition ("FD&A") costs for 2010 are $16.47/boe including future development costs and $3.40/boe excluding future development costs.
  • Through successful drilling, optimization and acquisition activities, P+P reserves, excluding BlackGold, increased to 202.1 mmboe (2009 – 199.5 mmboe);
  • Excluding BlackGold, Proved Developed Producing reserves continue to represent a high percentage (approximately 83%) of Total Proved reserves while Total Proved reserves represent approximately 71% of Total P+P reserves;
  • Excluding BlackGold, P+P reserve life index increased from 10.6 in 2009 to approximately 11.2 years based on average 2010 production of 49,397 boe/d, and
  • The net present value (NPV) (before taxes, discounted at 10%) of Harvest's P+P reserves increased to $4,888.7 million (2009 - $3,826.6 million). The NPV of total Proved reserves also increased to $3,233.7 million (2009 - $2,905.2 million).

HARVEST RESERVES SUMMARY

Harvest's reserves for the year ended December 31, 2010 were evaluated in accordance with National Instrument 51-101 ("NI 51-101") by the independent reserve evaluators McDaniel & Associates Consultants Ltd. ("McDaniel") who evaluated approximately 20% and GLJ Petroleum Consultants Ltd. ("GLJ") who evaluated approximately 80%. The complete reserves disclosure as required under NI 51-101, will be contained in Harvest's 2010 Renewal Annual Information Form, to be filed on SEDAR on or before March 30, 2011.

The following tables summarize certain information contained in Harvest's reserves report.

HARVEST RESERVES SUMMARY AS AT DECEMBER 31, 2010 – FORECAST PRICES AND COSTS              
Gross(1)                            

 


Bitumen

 
Light &
Medium
Crude Oil(5)

 


Heavy Crude Oil

 
Associated &
Non-
Associated Gas

 

Natural Gas
Liquids

 
Total Oil
Equivalent(3)
2010

 
Total Oil
Equivalent(3)
2009

 
Reserves Category (mmbbl ) (mmbbl ) (mmbbl ) (Bcf ) (mmbbl ) (mmboe ) (mmboe )
Proved                            
  Developed Producing 0   56.2   30.0   164.4   5.8   119.5   116.0  
  Developed Non-Producing 0   1.0   1.7   11.4   0.4   4.9   5.6  
  Undeveloped 93.6   11.2   3.6   27.0   0.6   113.5   18.7  
Total Proved 93.6   68.4   35.4   202.8   6.8   237.9   140.3  
Total Probable 165.6   25.6   15.9   80.3   2.8   223.3   59.2  
Total Proved Plus Probable(4) 259.2   94.0   51.3   283.1   9.6   461.3   199.5  
                             
Net(2)                            

 


Bitumen

 
Light &
Medium
Crude Oil(5)

 


Heavy Crude Oil

 
Associated &
Non-
Associated Gas

 

Natural Gas
Liquids

 

Total Oil
Equivalent(3) 2010

 

Total Oil
Equivalent(3) 2009

 
Reserves Category (mmbbl ) (mmbbl ) (mmbbl ) (Bcf ) (mmbbl ) (mmboe ) (mmboe )
Proved                            
  Developed Producing 0   50.3   26.6   144.9   4.3   105.4   102.5  
  Developed Non-Producing 0   0.8   1.4   10.1   0.3   4.1   4.6  
  Undeveloped 77.1   9.6   3.0   22.4   0.5   93.9   15.5  
Total Proved 77.1   60.8   31.0   177.4   5.0   203.5   122.5  
Total Probable 130.7   22.6   13.0   69.8   2.1   180.0   50.3  
Total Proved Plus Probable(4) 207.8   83.4   44.0   247.2   7.1   383.5   172.9  

Notes:

  1. "Gross" reserves means the total working interest share of Harvest's remaining recoverable reserves before deductions of royalties payable to others.
  2. "Net" reserves means Harvest's gross reserves less all royalties payable to others.
  3. Oil equivalent amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. Boes may be misleading, particularly if used in isolation. This conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
  4. Columns may not add due to rounding.
  5. The reserves attributable to Harvest's Hay River property, which is an area that produces medium gravity crude oil (average 24° API), are subject to a heavy oil royalty regime in British Columbia and would be required, under NI 51-101, to be classified as heavy oil for that reason. We have presented Hay River reserves as medium gravity crude in the following reserve tables as they would otherwise be classified in this fashion were it not for the lower rate royalty regime applied in British Columbia. If the Hay River reserves were included in the heavy crude oil category, it would increase the gross heavy oil reserves and reduce the light/medium oil reserves by the following amounts: PDP: 11.4 mmboe, Proved Undeveloped: 5.8 mmboe, Total Proved: 17.1 mmboe, Probable: 5.6 mmboe and P+P: 22.7 mmboe, and would increase the net heavy oil reserves and reduce the light/medium oil reserves by the following amounts: PDP: 9.9 mmboe, Proved Undeveloped: 4.8 mmboe, Total Proved: 14.8 mmboe, Probable: 4.9 mmboe, and P+P: 19.7 mmboe.

HARVEST NET PRESENT VALUE OF FUTURE NET REVENUE OF RESERVES AS AT DECEMBER 31, 2010: FORECAST PRICES AND COSTS

Harvest's crude oil, natural gas and natural gas liquids reserves were evaluated using McDaniel's product price forecasts effective January 1, 2011 prior to provision for income taxes, interest, debt service charges and general and administrative expenses. Note that this presentation has been based on a before tax basis. When the tax measures announced on October 31, 2006 and passed into law in 2007 become enacted in 2011, the after tax values may differ from the pre-tax number presented herein. It should not be assumed that estimates of the discounted future net production revenue represent the fair market value of Harvest's reserves.

   
AGGREGATE SUMMARY OF NET PRESENT VALUE OF FUTURE NET REVENUE OF RESERVES AS AT DECEMBER 31, 2010:  
  0% Disc.   5% Disc.   10% Disc.   15% Disc.   20% Disc.  
Reserves Category ($millions ) ($millions ) ($millions ) ($millions ) ($millions )
Proved                              
  Developed Producing $ 4,315.45   $ 3,152.61   $ 2,520.54   $ 2,117.93   $ 1,837.45  
  Developed Non-Producing $ 159.73   $ 110.05   $ 83.64   $ 67.10   $ 55.73  
  Undeveloped $ 2,597.86   $ 1,234.95   $ 629.51   $ 315.95   $ 133.93  
Total Proved $ 7,073.05   $ 4,497.62   $ 3,233.69   $ 2,500.98   $ 2,027.10  
Total Probable $ 6,826.41   $ 3,121.94   $ 1,654.98   $ 966.53   $ 599.95  
Total Proved Plus Probable(1) $ 13,899.45   $ 7,619.55   $ 4,888.67   $ 3,467.50   $ 2,627.06  

Notes:
(1) Columns may not add due to rounding

MCDANIEL & ASSOCIATES CONSULTANTS LTD. JANUARY 1, 2011 PRICE FORECAST

A summary of the McDaniel price forecast as at January 1, 2011 that was used in the Harvest reserves evaluation is listed below. A complete listing of the price forecast is available on the McDaniel's website at the following link http://www.mcdan.com/pricing_forecasts.html.




Year


WTI Crude Oil
$US/bbl1
  Edmonton
Light Crude
Oil
$C/bbl2
  River
Hardisty
Crude Oil
$C/bbl3
 
Alberta
Heavy Crude
Oil $C/bbl4
 
Alberta AECO
Spot Price
$C/GJ
  US/CAN
Exchange
Rate
$US/$CAN
2011 85.0   84.2   72.8   66.7   4.25   0.975
2012 87.7   88.4   75.0   68.7   4.90   0.975
2013 90.5   91.8   75.1   68.6   5.40   0.975
2014 93.4   94.8   77.5   70.8   5.90   0.975
2015 96.3   97.7   80.0   73.0   6.35   0.975
2016 99.4   100.9   82.5   75.4   6.75   0.975
2017 101.4   102.9   84.2   76.9   7.10   0.975
2018 103.4   104.9   85.9   78.4   7.40   0.975
2019 105.4   107.0   87.5   80.0   7.60   0.975
2020 107.6   109.2   89.3   81.6   7.75   0.975
2021 109.7   111.3   91.1   83.2   7.85   0.975
2022 111.9   113.6   92.9   84.9   8.05   0.975
2023 114.1   115.8   94.7   86.6   8.20   0.975
2024 116.4   118.1   96.7   88.3   8.40   0.975
2025 118.8   120.6   98.6   90.1   8.50   0.975
 
Thereafter +2%/yr   +2%/yr   +2%/yr   +2%/yr   +2%/yr   0.975

Notes:

  1. West Texas Intermediate at Cushing Oklahoma 40 degrees API/0.5% sulphur
  2. Edmonton Light Sweet 40 degrees API, 0.3% sulphur
  3. Bow River at Hardisty Alberta (Heavy stream)
  4. Heavy crude oil 12 degrees API at Hardisty Alberta (after deduction of blending costs to reach pipeline quality)
   
HARVEST 2010 RECONCILIATION TABLE – FORECAST PRICES AND COSTS  
  TOTAL BARREL OF OIL EQUIVALENT (boe)  
  Gross Proved   Gross Proved Plus Probable  
FACTORS (mmboe ) (mmboe )
December 31, 2009 140.3   199.5  
  Technical Revisions 3.8   (3.6 )
  Drilling Extensions 4.4   7.5  
  Infill Drilling 3.7   5.0  
  Improved Recovery 1.0   0.1  
  Acquisitions/Divestitures 102.6   270.7  
  Production (17.9 ) (17.9 )
December 31, 2010(1) 237.9   461.3  

Note:
(1) Columns may not add due to rounding.

Corporate Profile

Harvest, a wholly-owned subsidiary of KNOC, is a significant operator in Canada's energy industry with an integrated structure with upstream (exploration, development and production of crude oil and natural gas) and downstream (refining and marketing of distillate, gasoline and fuel oil) segments. Our upstream oil and gas production is weighted approximately 70% to crude oil and liquids and 30% to natural gas, and is complemented by our long-life refining and marketing business. Harvest's outstanding debentures are traded on the TSX under the symbols "HTE.DB.D", "HTE.DB.E", "HTE.DB.F" and "HTE.DB.G".

KNOC is a state owned oil and gas company engaged in the exploration and production of oil and gas along with storing petroleum resources. KNOC will fully establish itself as a global government-run petroleum company by applying ethical, sustainable, and environment-friendly management and by taking corporate social responsibility seriously at all times. For more information on KNOC, please visit their website at www.knoc.co.kr/ENG/main.jsp.

Advisory

Certain information in this press release, including management's assessment of future plans and operations, contains forward-looking information that involves risks and uncertainties. Such risks and uncertainties include, but are not limited to, risks associated with: imprecision of reserve estimates; conventional oil and natural gas operations; the volatility in commodity prices, interest rates and currency exchange rates; realizing the value of acquisitions; general economic, market and business conditions; changes in environmental legislation and regulations; the availability of sufficient capital from internal and external sources; and, such other risks and uncertainties described from time to time in Harvest's regulatory reports and filings made with securities regulators.

Forward-looking statements in this press release may include, but are not limited to, statements made throughout with reference to production volumes, refinery throughput volumes, royalty rates, operating costs, commodity prices, administrative costs, price risk management activities, acquisitions and dispositions, capital spending, reserve estimates, access to credit facilities, income taxes, cash from operating activities, and regulatory changes. For this purpose, any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward- looking statements. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions.

Readers are cautioned not to place undue reliance on forward-looking statements as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Harvest assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

 


FOR FURTHER INFORMATION PLEASE CONTACT:

John Zahary
Harvest Operations
President & CEO
(403) 265-1178

Jeremy Dietz
Harvest Operations
Investor Relations
(403) 265-1178

2100, 330 - 5th Avenue S.W.
Harvest Operations
Calgary, AB Canada T2P 0L4
Toll Free Investor Mailbox: (866) 666-1178
information@harvestenergy.ca
www.harvestenergy.ca