The business plans at IPO was based on acquiring mature properties and then eke out additional value by using production enhancement and optimization efforts. The initial acquisitions were mature oil producing properties in Eastern Alberta. Since then, the company diversified into natural gas properties although production is weighted 70% in favor to oil. In October 2006, they acquired North Atlantic refinery for C$1.6B.
Harvest is structured as a Canadian Royalty Trust (CanRoy) and has a monthly dividend distribution policy. CanRoys have certain tax advantages both for the company (set to expire 2011) and for the investor. Harvest announced a 20% dividend cut in mid-November which prompted an immediate sell off. The yield is now close to 16%.
Below is the properties map and a summary of their upstream business activity:
|Wainwright||Eastern Alberta||Enhanced Oil Recovery (EOR)||100% working interest Sparky medium gravity oil pool - 133mmboe net Harvest Original Oil In Place (OOIP). Indications are for pool-wide recovery factors to exceed 50%, compared to current recovery factors of approximately 35%.|
|Bellshill Lake||Eastern Alberta||Enhanced Oil Recovery (EOR)||99% working interest - 216 mmboe net Harvest OOIP with a recovery factor of 49%. Potential to add up to 16mmboe which will increase P&P reserves by 125%.|
|Hayter||Eastern Alberta||Enhanced Oil Recovery (EOR)||138mmboe net Harvest OOIP - Dina heavy oil resource with ~20% recovery factor. Pilots to determine the most effective enhanced recovery technique in progress.|
|Kindersley||Southwest Saskatchewan||Enhanced Oil Recovery (EOR)||79% working interest – 80mmboe of OOIP (Light Oil) with ~28% recovery factor. Working with a 3rd party to determine the most effective enhanced recovery technique.|
|Hay River||British Colombia||Enhanced Oil Recovery (EOR)||200 mmboe of OOIP (medium gravity) with 8% recovery to date. Working on enhancing the longer-term recovery potential.|
|Oil Sands||Alberta||Enhanced Oil Recovery (EOR)||47,000 net acres of oil sands leases. Test evaluation wells to confirm the estimated 1 billion bbl of OOIP in progress.|
|Markerville||Alberta||Exploration Activities||100% Harvest working interest. Pilot indicated about 500 boepd including liquids. 3-5 additional locations to be drilled as part of the 2008 program.|
|Central Alberta||Alberta||Exploration Activities||100% Harvest working interest. Pilots indicate 800 boepd including liquids. At least one follow-up location for 2008 to downspace further to maximize recovery.|
|Lloydminster||Alberta||Exploration Activities||Current production of 1500 boepd heavy oil. Further exploration activity in progress.|
Below is a summary of their downstream businesses:
|Medium sour crude oil refining||115000 bbl/day. Output sold 10% locally and the rest internationally (Boston, New York, Europe, etc.). Crude oil feedstock from Middle East, Russia, South America, and Africa||The refinery takes in medium sour crude oil and vacuum gas oil at a rough ratio of 11:1 and produces distillate products, gasoline, and heavy fuel oil in the ratio 41:32:27.|
|Marine Terminal and Related Assets||Year-round deep water ice free jetty with two births (90-326K dwt), averages 325 ships, and has a tank farm capacity of 7.5M barrels of crude||Manages and escorts fuel traffic from and to the refinery. Owns two tugs and has arrangement with adjacent facility to meet demand surges.|
|Marketing||Five Segments: Retail, Wholesale, Home heat, Commercial, and Bunkers (fuel for ships)||64 retail locations and six home heat stores. 14.6% overall NL market share.|