SOURCE: Harken Energy Corporation

February 28, 2007 17:25 ET

Harken Energy Reports Higher Revenue, Higher Operating Margin and Repurchase of Common Shares Outstanding in 2006

DALLAS, TX -- (MARKET WIRE) -- February 28, 2007 -- Harken Energy Corporation (AMEX: HEC) ("Harken") today reported its annual financial results for the year ended December 31, 2006. Harken's strategy is to enhance value for its stockholders through the development of a well-balanced portfolio of energy-based assets. Harken's Gulf Coast oil and gas assets and its coalbed methane prospects provide a large inventory of both high and low-risk exploitation projects and high-potential exploration opportunities. To develop these assets, in 2006, Harken invested approximately $10.9 million and $1.0 million, respectively, of capital expenditures into its Gulf Coast oil and gas properties and coalbed methane prospects. Consistent with its strategy previously reported in 2006, Harken diversified its holdings of oil and gas assets by acquiring an investment in a junior oil and gas exploration company in Canada. Also in 2006, Harken began engaging in the active management of investments in energy industry securities traded on domestic securities exchanges. Harken strives to obtain favorable investment returns by diversifying investment holdings within the energy sector and balancing risk exposures. During 2006, Harken held approximately $7.9 million outstanding in average notional value in a combination of exchange-traded options on futures contracts and common stock. Harken also strives to enhance the balance of its oil and gas portfolio through the acquisition or investment in additional energy-based diversified opportunities.

Financial Highlights

Significant financial highlights in 2006 include the following:

--  Increased pro-forma production and revenues generated by Harken's Gulf
    Coast oil and gas properties of $23 million, 30% higher than 2005.
    
--  Increased pro-forma operating margin of $11 million, 69% higher than
    2005 (Non-GAAP; see reconciliation below).
    
--  Decreased general and administrative expenses 19% to $5.6 million in
    2006 compared to $7.0 million in 2005.
    
--  Repurchased 4.4 million common shares in 2006 reducing its shares
    outstanding.
    
As previously disclosed, Harken deconsolidated the financial operations of Global Energy Development PLC ("Global") during the second quarter of 2006. Harken was required to reflect this deconsolidation prospectively. As a result of this treatment, Global's operations for the quarter ended March 31, 2006 are still included in Harken's consolidated financial statements at December 31, 2006.

Harken included pro forma results in its Annual Report on Form 10-K including an unaudited pro forma combined condensed balance sheet at December 31, 2005 along with the unaudited pro forma combined condensed statement of operations for the years ended December 31, 2004 and 2005 giving effect to the deconsolidation of Global's operations as if it had been effective for all periods presented. The combined condensed balance sheet at December 31, 2006 is presented as reported. The unaudited pro forma data is presented for illustrative purposes only and is not necessarily indicative of future operating results: (in thousands except for share and per share amounts)

                                           Year Months Ended
                                              December 31,
                             ---------------------------------------------
                                 2004            2005            2006
                             -------------   -------------   -------------
                               Pro-Forma       Pro-Forma       Pro-Forma
                              (unaudited)     (unaudited)     (unaudited)
                              (restated)      (restated)

Total Revenues and Other     $      18,840   $      18,862   $      25,170
Oil and Gas Operating
 Expenses                    $       5,382   $       5,288   $       8,332
General and Administrative
 Expenses                    $       6,562   $       6,950   $       5,649

Operating Margin (Non-GAAP;
 see reconciliation below)   $       6,896   $       6,624   $      11,189
Depreciation, Depletion, and
 Amortization                $       7,254   $       5,936   $       9,134
Increase in Lyford Warrant
 Liability                   $      13,301   $      12,947   $           -
Gain on Sale of Global
 Shares                      $           -   $      27,957   $           -
Gain on Exercise of Global
 Warants                     $           -   $      28,341   $           -
Unrealized Gain (losses) on
 Global Warrants             $      11,784   $     (14,407)  $           -
Loss from Discontinued
 Operations, net of taxes    $        (897)  $      (2,817)  $      (1,223)
Net Income (Loss)            $      (2,441)  $      25,819   $         257

Net Income Attributed to
 Common Stock                $      (2,956)  $      25,232   $      (1,132)
Basic Net Income per Common
 Share                       $       (0.01)  $        0.12   $       (0.01)
Basic Weighted Average
 Common Shares Outstanding     201,702,235     219,369,798     222,941,410
Diluted Net Income per
 Common Share                $       (0.01)  $        0.11   $       (0.01)
Diluted Weighted Average
 Common Shares Outstanding     201,702,235     243,634,909     222,941,410
Pro-Forma Balance Sheet Summary (in thousands)
                                                      December 31,
                                             ------------------------------
                                                  2005            2006
                                             --------------  --------------
                                               Pro-Forma       As Reported
                                              (unaudited)
                                              (restated)

Current Ratio (1)                                 3.19 to 1       3.29 to 1
Working Capital (2)                          $       33,480  $       28,962
Cash and Short-Term Investments              $       29,269  $       30,954
Total Debt                                   $            -  $            -
Cash and Short-Term Investments less Debt    $       29,269  $       30,954
Stockholders' Equity                         $      129,715  $      105,115
Total Liabilities to Equity                  $    0.16 to 1  $    0.19 to 1

(1) Current ratio is calculated as current assets divided by current liabilities.

(2) Working capital is the difference between current assets and current liabilities.

Operating Summary

Harken's Gulf Coast oil and gas operations consist all of its exploration, development, production and acquisition efforts in the United States. The following table sets forth its oil and gas operating results for each of the years in the three-year period ended December 31, 2006:

(Thousands of dollars, except per-unit
 amounts)                                     2004       2005       2006
                                           ---------- ---------- ----------
Oil and Gas Revenues                       $   18,015 $   17,854 $   23,150
                                           ---------- ---------- ----------
Net oil sold (thousands of bbls)                  181        135        167
Net gas sold (thousands of mcf)                 1,739      1,266      1,712
Average price of oil sold (per bbls)       $    40.06 $    52.62 $    64.30
Average price of gas sold (per mcf)        $     6.18 $     8.51 $     7.23
Average production & transportation costs
 (per mcfe)                                $     1.90 $     2.55 $     3.07
                                           ---------- ---------- ----------
Harken's natural gas revenue increased 15% to approximately $12.4 million during 2006 as compared to $10.8 million during 2005. Although natural gas volumes increased 35% from 1,266,000 Mcf for 2005 to 1,712,000 Mcf for 2006, the prices realized for natural gas sales fell from $8.51 per mcf to $7.23 per mcf during 2006. The volume increase was attributed to new or improved production at Allen Ranch, Lapeyrouse, Raymondville and Lake Raccourci fields following the hurricanes from the prior year.

Harken's oil revenues increased 52% to approximately $10.8 million during 2006 from approximately $7.1 million during 2005. After fully recovering to pre-storm levels following the hurricanes of 2005, Harken experienced a 24% increase in oil production during 2006 compared to the prior year. Harken also realized an increase in oil prices received of 22% which averaged $64.30 per barrel in 2006 compared to $52.62 per barrel in the prior year.

Harken's oil and gas operating expense increased 58% to approximately $8.3 million during 2006 compared to approximately $5.3 million during 2005 primarily due to increases in the cost of insurance, continuing repair costs related to storms of 2005, demand-driven price increases for oilfield services and equipment associated with increased oilfield activity (particularly in offshore Louisiana), as well as remedial workovers performed in the normal course of business.

NON-GAAP FINANCIAL MEASURE

Reconciliation of Operating Margin to Net Income (Loss) (in thousands)

                                                     Year Ended
                                                     December 31,
                                            -------------------------------
                                                 2005            2006
                                            --------------   --------------
                                               Pro-Forma        Pro-Forma
                                              (unaudited)      (unaudited)

Net Income  - GAAP                          $       25,819   $          257
Depreciation, Depletion, and Amortization            5,936            9,134
Increase in Lyford Warrant Liability                12,947                -
Accretion Expense                                      343              420
Interest Expense and Other, net                        638              155
Gain on Sale of Global Shares                      (27,957)               -
Gain on Exercise of Global Warrants                (28,341)               -
Unrealized Gain on Global Warrants                  14,407                -
Income Tax Expense                                      15                -
Loss from Discontinued Operations, net of
 taxes                                               2,817            1,223
                                            --------------   --------------
Operating Margin                            $        6,624   $       11,189
                                            ==============   ==============
Management believes the presentation of this non-GAAP financial measure, in connection with the results for the year ended December 31, 2006, provides useful information to investors regarding Harken's results of operations. Management also believes that this non-GAAP financial measure provides a picture of Harken's results that is comparable among reporting periods and provides factors that influenced performance during the period under the report. This non-GAAP financial measure should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

Harken Energy Corporation is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries and shareholdings. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com. Please e-mail all investor inquiries to HECinquiries@ctapr.com.

Certain statements in this announcement, such as "strives for", "favorable investment returns" as well as other similar statements and inferences derived there from may be regarded as "forward-looking statements" within the meaning of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on the opinions and estimates of management at the time the statements are made. Management's current view and plans, however, are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. The various uncertainties, variables, and other risks include those discussed in detail in the Company's SEC filings, including the Annual Report on Form 10-K filed on February 28, 2007. Harken undertakes no duty to update or revise any forward-looking statements. Actual results may vary materially.

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