UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



FORM 10-K/A

Amendment No. 1

(Mark One)



[ X ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

or

[    ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission File No.:   1-10762



HARVEST NATURAL RESOURCES, INC.

(Exact name of registrant as specified in its charter)





Registrant's telephone number, including area code: (281) 899-5700



Securities registered pursuant to Section 12(b) of the Act:    



Securities registered pursuant to Section 12(g) of the Act:  Preferred Share Purchase Rights



Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes       No   X  



Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes       No   X  



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   X   No      



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   X   No      



Indicate by check mark if disclosure of delinquent filers pursuant to Item  405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [   X   ]



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Large Accelerated Filer       Accelerated Filer   X   Non-Accelerated Filer      Smaller Reporting Company      



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes       No   X  



The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2015 was:  $72,142,875.



Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date.  Class:  Common Stock, par value $0.01 per share, on April 25, 2016, shares outstanding: 51,415,164.



 DOCUMENTS INCORPORATED BY REFERENCE



None.



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HARVEST NATURAL RESOURCES, INC.

FORM 10-K/A

TABLE OF CONTENTS



 



 

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EXPLANATORY NOTE



The purpose of this Amendment No. 1 on Form 10-K/A (“Amended Report”) is to amend Part III, Items 10 through 14 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which was filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2016 (the “2015 10-K”), to include information previously omitted from the 2015 10-K in reliance on General Instruction G to Form 10-K, which provides that registrants may incorporate by reference certain information from a definitive proxy statement filed with the SEC within 120 days after the end of the fiscal year. The Company’s definitive proxy statement will not be filed within 120 days after the end of the Company’s 2015 fiscal year.



As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by our principal executive officer and principal financial officer are filed as exhibits to this Amended Report under Item 15 of Part IV hereof.



Except as stated herein, the Company has not modified or updated disclosures presented in the 2015 10-K in this Amended Report. Accordingly, this Amended Report does not reflect events occurring after the filing of our 2015 10-K or modify or update those disclosures, including the exhibits to the 2015 10-K, affected by subsequent events. As such, our 2015 10-K continues to speak as of March 29, 2016 (the date it was filed with the SEC). Accordingly, this Amended Report should be read in conjunction with the 2015 10-K and our other reports filed with the SEC subsequent to the filing of our 2015 10-K, including any amendments to those filings.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

BOARD OF DIRECTORS

The Company’s Board is comprised of seven members:

Stephen D. Chesebro’

Appointed Director in October 2000

Age 74



Mr. Chesebro’ has served as the Chairman of the Board of the Company since 2001. From December 1998 until he retired in 1999, he served as President and Chief Executive Officer of PennzEnergy, the independent oil and gas exploration and production company that was formerly a business unit of Pennzoil Company. From February 1997 to December 1997, Mr. Chesebro’ served as Group Vice President – Oil and Gas and from December 1997 until December 1998 he served as President and Chief Operating Officer of Pennzoil Company, an integrated oil and gas company. From 1993 to 1996, Mr. Chesebro’ was Chairman and Chief Executive Officer of Tenneco Energy. Tenneco Energy was part of Tenneco, Inc., a worldwide corporation that owned diversified holdings in six major industries. Mr. Chesebro’ is an advisory director to Preng & Associates, an executive search consulting firm. In 1964, Mr. Chesebro’ graduated from the Colorado School of Mines. He was awarded the school’s Distinguished Achievement Medal in 1991 and received his honorary doctorate from the institution in 1998. He currently serves on the school’s visiting committee for petroleum engineering, and is a member of the Colorado School of Mines Foundation Board of Governors. In 1994, Mr. Chesebro’ was the first American awarded the H. E. Jones London Medal by the Institution of Gas Engineers, a British professional association. 





Oswaldo Cisneros

Appointed Director in June 2015

Age 75



Mr. Cisneros started his career in the soft drink industry in 1961 and served as the president of Pepsi Cola Venezuela until 1996, when the Cisneros Group undertook a strategic alliance with the Coca Cola Company.  Mr. Cisneros also served as the president of Telcel Celular, C.A., a partner of Bellsouth International.  Mr. Cisneros currently serves as president and is a shareholder of the following companies:  Corporación Digitel, a telecom company, Maritime Contractors de Venezuela, an oil drilling services company, Fabrica Nacional de Vidrios, a glass bottle manufacturer, and Central Azucarero Portuguesa, a sugar mill factory.  Mr. Cisneros received a degree in Business Administration from Babson College, USA, in 1961.



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Francisco D’Agostino

Appointed Director in June 2015

Age 41



From 1996 to 1999, Mr. D’Agostino was vice president - Finance of Dayco Holding Corp, his family’s real estate management and construction company.  From 2000 to 2010, he served as director and president of Grupo Empresarial Alfa-Caracas, Venezula, a real estate management and construction company.  Since 2000 he has served as director and vice president of Private Banking at Banco Occidentel de Descuento – Caracas, Venezuela, and since 2007 he has also served as president of D’Agostino & Company, Ltd., a financial advisory and investment firm.  In 2008, he founded and has served as president of Element Capital Group – Panama City, Panama, an asset management firm.  Mr. D’Agostino is a director of Dayco Telecom-Venezuela, a Venezuelan internet company; BancAmerica – Dominican Republic, a commercial bank; and Fundacion Dayco – Caracas, a Venezuelan family charitable foundation.  Mr. D’Agostino graduated from Boston College with a Bachelor of Science in Economics and Finance.





James A. Edmiston

Elected Director in May 2005

Age 56



Mr. Edmiston was elected President and Chief Executive Officer of Harvest Natural Resources, Inc. on October 1, 2005. He joined the Company as Executive Vice President and Chief Operating Officer on September 1, 2004. Prior to joining Harvest, Mr. Edmiston was with Conoco and ConocoPhillips for 22 years in various management positions including President, Dubai Petroleum Company (2002-2004), a ConocoPhillips affiliate company in the United Arab Emirates and General Manager, Petrozuata, C.A., in Puerto La Cruz, Venezuela (1999-2001). Prior to 1999, Mr. Edmiston also served as Vice President and General Manager of Conoco Russia and then as Asset Manager of Conoco’s South Texas Lobo Trend gas operations. On March 27, 2014, Mr. Edmiston was appointed to the board of Sonde Resources Corp. He earned a Bachelor of Science degree in Petroleum Engineering from the Texas Tech University and a Masters of Business Administration from the Fuqua School of Business at Duke University. Mr. Edmiston was inducted into the Petroleum Engineering Academy and was recognized as a Distinguished Engineer by the Texas Tech College of Engineering in 2009. Mr. Edmiston is a Member of the Society of Petroleum Engineers.





Robert E. Irelan

Appointed Director in February 2008

Age 69



Mr. Irelan has over 45 years of experience in the oil and gas industry. He retired from Occidental Petroleum as Executive Vice President of Worldwide Operations in April 2004, having started there in 1998. Prior to Occidental Petroleum, Mr. Irelan held various positions at Conoco, Inc., from 1967 until 1998. Upon his retirement he opened his own company, Naleri Investments LLC. He also partnered in several entrepreneurial ventures including Rapid Retail Solutions LLC, BISS Product Development LLC and All About Baby LLC. Mr. Irelan earned his Professional Engineering degree in Petroleum Engineering from Colorado School of Mines. He also has advanced studies in Mineral Economics. He was awarded the Distinguished Achievement Award from the school in 1998. 





Edgard Leal

Appointed Director in June 2015

Age 74



Since 2005 Mr. Leal has served as a director of Leal, Leal & Associados, an advisory service to Venezuelan companies and investor groups, and as managing director of Asesorias y Servicios Gaspetro, C.A., an advisory services company. From 1998 to 2006, Mr. Leal was Senior Associate of Cambridge Energy Research Associates, providing advisory services to Latin American oil and gas companies.  From 1980 to 2003, he was a director of Shipowners Mutual Protection and Indemnity, an insurance company. From 1998 to 2001, he was vice president of Banco Caracas, a private section bank in Venezuela. From 1994 to 1998, he was president of Centro de Aralisis y Negociacion – Internacional, C.A., providing advisory services to banks and other financial institutions in Venezuela.  From 1975 to 1994, he served as a director, president of Bariven and a managing director of Petroleos de Venezuela (PDVSA), managing the centralized finances for PDVSA.  From 1989 to 1990, Mr. Leal was the Commissioner of the President of Venezuela, negotiating foreign commercial bank debt with international banks.  From 1969 to 1975, he was a Vice President of CitiBank, managing its credit and public sector lending in Venezuela.  From 1966 to 1975, Mr. Leal represented the Government of Venezuela in the Economic Commission of the Organization of Petroleum-Exporting Countries; from 1963 to 1966 he served as Assistant to the Minister Counselor for Petroleum Affairs in the Embassy of Venezuela in the United States, conducting discussions with the U.S. Department of Energy on the U.S. Oil Import Program. Mr. Leal received a Bachelor of Arts degree in Economics from Rollins College in 1962 and a Master of Arts degree in Economics from Catholic University of America in 1966.





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Patrick M. Murray

Appointed Director in October 2000

Age 73



In 2007, Mr. Murray retired from Dresser, Inc. He had been the Chairman of the Board and Chief Executive Officer since 2004. Dresser, Inc. is an energy infrastructure and oilfield products and services company. From 2000 until becoming Chairman of the Board, Mr. Murray served as President and Chief Executive Officer of Dresser, Inc. Mr. Murray was President of Halliburton Company’s Dresser Equipment Group, Inc.; Vice President, Strategic Initiatives of Dresser Industries, Inc.; and Vice President, Operations of Dresser, Inc. from 1996 to 2000. Mr. Murray has also served as the President of Sperry-Sun Drilling Services from 1988 through 1996. Mr. Murray joined NL Industries in 1973 as a Systems Application Consultant and served in a variety of increasingly senior management positions.    Mr. Murray is on the board of the World Affairs Council of Dallas Fort Worth.  He is on the board of advisors for the Maguire Energy Institute at the Edwin L. Cox School of Business, Southern Methodist University, and a member of the Board of Regents of Seton Hall University. Mr. Murray holds a B.S. degree in Accounting and a Master of Business Administration from Seton Hall University. He served for two years in the U.S. Army as a commissioned officer.



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EXECUTIVE OFFICERS

The following table provides information regarding each of our executive officers.







*  See Mr. Edmiston’s biography on page 2.

Stephen C. Haynes has served as our Vice President, Finance, Chief Financial Officer and Treasurer since May 19, 2008. Mr. Haynes performed various financial consulting engagements from January 1, 2008 until his appointment with Harvest. Previously, he served as Chief Financial Officer for Cygnus Oil and Gas Corporation for the period February 1, 2006 through December 31, 2007. Before joining Cygnus, Mr. Haynes was the Corporate Controller with Carrizo Oil and Gas for the period January 1, 2005 through January 31, 2006. Mr. Haynes served as an independent consultant from March 2001 through the end of 2004. From March 1990 through December 2000, Mr. Haynes served in a series of increasing responsibilities in international managerial and executive positions with British Gas, culminating in his appointment as Vice President-Finance of Atlantic LNG, a joint venture of British Gas and several industry partners in Trinidad and Tobago. Mr. Haynes is a Certified Public Accountant, holds a Master of Business Administration degree with a concentration in Finance from the University of Houston and a Bachelor of Business Administration degree in Accounting from Sam Houston State University. He also attended the Executive Development Program at Harvard University.

Keith L. Head has served as our Vice President, General Counsel and Corporate Secretary since May 7, 2007. He joined Texas Eastern upon graduation from law school and remained with the same organization through mergers with Panhandle Eastern, Duke Energy Corporation and Cinergy Corp. Mr. Head held various business development positions with Duke Energy Corporation from 1995 to 2001. His corporate development work included the identification, evaluation and negotiation of acquisitions in Latin America, North America and the United Kingdom. Mr. Head was Senior Vice President and General Counsel at Duke Energy North America from 2001 to 2004 and Associate General Counsel of Duke Energy Corporation from 2004 through December 2006. After leaving Duke Energy, Mr. Head joined Harvest in May 2007.  He is a board member of the Houston chapter of The General Counsel Forum and formerly served as president of the board for the Texas Accountants and Lawyers for the Arts.  Mr. Head holds a Bachelor of Science degree in Business Administration from the University of North Carolina. He received both a Juris Doctorate and Masters in Business Administration from the University of Texas in 1983.

Karl L. Nesselrode has served as Vice President, Engineering and Business Development of the Company since November 17, 2003. From August 9, 2007 to August 2, 2010, he accepted a long-term secondment to Petrodelta as its Operations and Technical Manager while remaining an officer of Harvest. From February 2002 until November 2003, Mr. Nesselrode was President of Reserve Insights, LLC, a strategy and management consulting company for oil and gas. He was employed with Anadarko Petroleum Corporation as Manager Minerals and Special Projects from July 2000 to February 2002. Mr. Nesselrode served in various managerial positions with Union Pacific Resources Company from August 1979 to July 2000. Mr. Nesselrode earned a Bachelor of Science in Petroleum Engineering from the University of Tulsa in 1979 and completed Harvard Business School Program for Management Development in 1995.

Robert Speirs has served as Senior Vice President, Eastern Operations since July of 2011. Prior to his promotion, his title had been Vice President, Eastern Operations since December 6, 2007. He joined Harvest in June 2006 as President and General Manager, Russia. Previously Mr. Speirs was President of Marathon Petroleum Russia and General Director of their wholly-owned subsidiary, KhantyMansciskNefte Gas Geologia from March 2004 through May 2006. Prior to joining Marathon, Mr. Speirs was Executive Vice President of YUKOS EP responsible for engineering and construction from June 2001. During both these periods, Mr. Speirs spent considerable time in West Siberia where he oversaw substantial increases in production at both companies. From November 1997 until March 2001, Mr. Speirs resided in Jakarta where he served as President of Premier Oil Indonesia. During this period, Premier was active in all phases of the Upstream business, culminating in the commissioning of the West Natuna Gas Project. Prior to 1997, Mr. Speirs was with Conoco for 21 years in various leadership positions in the US, UK, Russia, Indonesia, Singapore and Dubai, UAE. Mr. Speirs earned a Bachelor of Science degree with Honors in Engineering Science from the University of Edinburgh. He also attended the Executive Management Program at INSEAD.







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CORPORATE GOVERNANCE

Audit Committee

Our Board of Directors has established a standing audit committee (the “Audit Committee”). The Audit Committee operates pursuant to a written charter. The charter is accessible in the Corporate Governance section of our website (http://www.harvestnr.com). 

From January 1, 2015 until June 19, 2015, our audit committee consisted of Patrick M. Murray as Chairman, Igor Effimoff, H. H. Hardee and J. Michael Stinson.  On June 19, 2015, in connection with a financing involving CT Energy Holding SRL, the Company’s Board of Directors accepted the resignations of Dr. Effimoff, Mr. Hardee and Mr. Stinson and appointed Mr. Oswaldo Cisneros, Mr. Francisco D’Agostino and Mr. Edgard Leal as Board members, effective the same date.  The Board determined that Mr. Leal is independent for the purposes of the NYSE and its own internal policies.  Effective as of June 30, 2015, the audit committee of the Board is comprised of Mr. Murray as Chairman, Mr. Leal and Mr. Robert Irelan.    

The Audit Committee assists the Board in its oversight of our accounting and financial reporting policies and practices; the integrity of our financial statements; the independent registered public accounting firm’s qualifications, independence and objectivity; the performance of our internal audit function and our independent registered public accounting firm; and our compliance with legal and regulatory requirements. 

The Audit Committee acts as a liaison between our independent registered public accounting firm and the Board, and it has the sole authority to appoint or replace the independent registered public accounting firm and to approve any non-audit relationship with the independent registered public accounting firm. Our internal audit function and the independent registered public accounting firm report directly to the Audit Committee.

Our Audit Committee has established procedures for our employees or consultants to make a confidential, anonymous complaint or raise a concern over accounting, internal accounting controls or auditing matters concerning us or any of our companies and is responsible for the proper implementation of such procedures. The Audit Committee is also responsible for understanding and assessing our processes and policies for communications with stockholders, institutional investors, analysts and brokers.

The Audit Committee has access to our records and employees, and has the sole authority to retain independent legal, accounting or other advisors for committee matters. We will provide appropriate funding for the payment of the independent registered public accounting firm and any advisors employed by the Audit Committee.

The Audit Committee makes regular reports to the Board. Each year the Audit Committee assesses the adequacy of its charter and conducts a self-assessment review to determine its effectiveness.

The Board has determined that each member of the Audit Committee meets the independence standards of the Securities and Exchange Commission’s (“SEC”) requirements, the rules of the New York Stock Exchange and the Company Guidelines for Corporate Governance. No member of the Audit Committee serves on the audit committee of more than three public companies. The Board has further determined that each member of the Audit Committee is financially literate and that Mr. Murray qualifies as an audit committee financial expert, as defined in Item 407(d)(5) of SEC Regulation S-K. Information on the relevant experience of Mr. Murray is set forth in “Board of Directors” above.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, (“Section 16(a)”) requires our directors, executive officers and beneficial holders of more than 10 percent of our common stock to file reports with the SEC regarding their ownership and changes in ownership of our stock. Based solely upon our review of SEC Forms 3, 4 and 5 and any amendments thereto furnished to us, to our knowledge, during fiscal year 2015, our officers, directors and 10 percent stockholders complied with all Section 16(a) filing requirements. In making this statement, we have relied upon the written representations of our directors and officers.

Code of Ethics

The Board has adopted a Code of Business Conduct and Ethics, which applies to all of our directors, officers and employees. The Board last amended the Code of Business Conduct and Ethics in December 2014. The Board has not granted any waivers to the Code of Business Conduct and Ethics.

The Guidelines for Corporate Governance, the Code of Business Conduct and Ethics and the charters of all the Board committees are accessible on our website under the Corporate Governance section at http://www.harvestnr.com. Any amendments to or waivers of the Code of Conduct and Business Ethics will also be posted on our website.

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Item 11. Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

The Company’s Compensation Discussion and Analysis explains the key elements of our executive compensation program for our President and Chief Executive Officer and our other named executive officers whose 2015 compensation is in the Executive Compensation Tables starting on page 15.

Executive Summary

Our Company focuses on acquiring exploration, development, and producing properties in proven and active hydrocarbon systems. We hold interests in the Bolivarian Republic of Venezuela (“Venezuela”) and exploration acreage offshore Gabon.  We operate from our Houston, Texas headquarters with an office in Venezuela, and a field office in Port Gentil, Gabon.

Performance Highlights



2015 held many challenges for the Company. Among the accomplishments were:







Compensation Highlights

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The following graphs highlight the Company results for 2015:  



The Human Resources Committee (the “Committee”) of the Board of Directors has the discretion to exercise their judgment in weighing the achievement of specific performance measures.  For 2015, it again considered total shareholder return (“TSR”), reserves, social responsibility/governance and safety as well as strategic individual objectives for the named executive officers.  TSR was down 76%.  We calculate TSR as current year-end closing share price minus prior year closing share price divided by prior year closing share price.  Annual net production of Petrodelta, net to our ownership interest, in 2015 was down 4% over the prior year in Petrodelta.  There were no Foreign Corrupt Practices Act (“FCPA”) incidents in 2015, and the Company was accident-free in 2015.

Compensation Philosophy

Our compensation philosophy is to offer a competitive total compensation package to enable us to attract, motivate and retain key executives. Our compensation objectives include:

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The Committee oversees the development and execution of our compensation program. The Committee annually reviews our compensation philosophy and tests its ability to promote meeting the objectives stated above. The Committee recommends compensation for the named executive officers, short-term cash bonuses, long-term cash and non-cash compensation, and submits its recommendations to the Board of Directors for approval. Three independent directors comprise the Committee. The Committee meets as needed, but no less than quarterly to review compensation and benefit programs with management. It subsequently approves any changes. Our Human Resources, Accounting and Legal Department employees handle the day-to-day design and administration of employee compensation and benefit programs available to our employees.

Say-on-Pay Results

We hold our Say-on-Pay vote every other year.  At our September 9, 2015 annual stockholders meeting, Harvest received support for our compensation program with approval from approximately 76.5% of the stockholders who voted.  The Committee considered this support when contemplating potential changes to the Company’s compensation. 

Setting Executive Compensation

Our compensation program consists of base salary, annual performance-based incentive awards, long-term incentives and personal benefits.  Base salary and annual performance based incentive awards are cash-based. Long-term incentives typically consist of stock options, stock appreciation rights, restricted stock units and/or restricted stock awards. The Committee reviews the compensation recommendations from the CEO and our independent consultants’ advice on competitive trends regarding base salary, annual incentive awards and long-term incentives. The Committee exercises its collective judgment in establishing executive compensation based on performance, compensation history and market information. The recommendations are then made to the full Board of Directors for its approval.

The Role of the Compensation Consultant; Compensation Consultant Independence

In 2015, the Committee again engaged Frost Human Resource Consulting (“Frost HR Consulting”) as the Committee’s independent compensation consultant, to benchmark our executive officer compensation levels with similar positions in our industry peer group. The Committee reviews the relationship annually for any conflicts of interest. To ensure Frost HR Consulting’s independence:

Peer Group and Compensation Surveys

The Committee considered market information from 2014 and 2015 compensation surveys and peer company proxy statements in determining compensation for each of the executive officers.  The Committee reviews proxy statement data from a peer group of companies.  The surveys used for benchmarking included:

The Committee reviews the composition of the peer group and the compensation paid at these companies, as well as their corporate performance and other comparative factors in determining the appropriate compensation levels for our executives. No company in our peer group shares our unique risk profile, which is a function of our portfolio of producing assets and exploratory prospects as well as the regulatory and political environments in which we operate.  Therefore, the Committee uses its judgment and business experience in addition to the peer group data in determining executive compensation.

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The Committee selects peer companies for their shared similarities, including a common industry oil exploration focus, assets, market capitalization and enterprise value, among other factors. Revenue at the peer companies range from $11.5 million to $1148.3 million.



Frost HR Consulting typically benchmarks the 25th, 50th and 75th percentiles for the data sources mentioned above to provide the Committee with an understanding of competitive pay practices. These surveys, equally weighted with the proxy data, consider each element of compensation and are collectively referred to as the “market data” throughout this Compensation Discussion and Analysis. Frost HR Consulting also provides the Committee with advice on equity incentive compensation trends, including types and value of awards being used by other public companies.

The Role of the Executives in Human Resources Committee Meetings

The Committee invites our CEO, the Vice President, Administration and Human Resources and the Vice President, General Counsel and Corporate Secretary to attend its meetings. The Vice President, Administration and Human Resources acts as the Committee Secretary and provides reports on plan administration and human resources policies and programs. The Vice President, General Counsel and Corporate Secretary provides legal advice on human resource matters. The CEO makes recommendations with respect to specific compensation decisions. The Committee, without management present, regularly meets in executive session and with its compensation consultant to review executive compensation matters including market data as well as peer group information.

The CEO makes recommendations to the Committee on performance evaluations, base salary changes, and both equity and annual incentive based compensation for executive officers and senior management (other than the CEO). From time to time, the CEO and members of management are invited to participate in Committee meetings to provide information regarding our strategic objectives, financial performance and recommendations regarding compensation plans. Management may be asked to prepare information for any Committee meeting. Depending on the agenda for a particular meeting, these materials may include:

Executive Compensation Components

Our compensation program components are designed to reward executive officers’ contributions, while considering our specific operating situation and how they manage this situation consistent with our strategy. Factors considered in compensating our executives include individual experience, skill sets that are required for multi-national oil and gas operations and their proven record of performance.   The principal components of compensation and their purposes for executive officers are:





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Base Salary

We pay base salaries to our executive officers to compensate them for specific job responsibilities during the calendar year. In determining base salaries for our executive officers, the Committee considers market and competitive benchmark data for the executive’s level of responsibility targeting between the 50th and 75th percentile of executive officers in comparable companies, with variation based on individual executive skill sets. Compared to 2015 market data, our base salaries were between 91% and 110% of the target market median.

Based on our current financial situation, the Committee did not recommend salary increases in 2016 for the CEO and the other named executive officers.  In March 2014, the CEO and other named executive officers received an average salary increase of 3%.





Annual Performance-Based Incentive Awards (Bonus)

Each year, in addition to individual performance objectives, the Committee establishes Company performance measures for determining annual incentive awards as follows:

These measures and their weightings are reviewed and modified, if appropriate, in light of changing Company priorities and strategic objectives. The corporate targets and weightings are recommended by the CEO and reviewed and approved by the Committee. The Committee focuses on these corporate goals in evaluating Company performance for the purpose of compensation. Individual performance results of the named executive officers are measured and assessed by the CEO.

Among these corporate goals, total shareholder return was weighted at 60%.  The Company realized a total shareholder return of negative 76%, due in part to declining oil prices. This total shareholder return places Harvest in the 3rd quartile among its peer group.

Reserves/Production/Estimated Market Value (EMV) was weighted at 30%. Production decreased by approximately 4% over 2014 at Petrodelta, our Venezuelan affiliate.

Social Responsibility and Governance was weighted at 10% and is used at the discretion of the Committee in deciding the final corporate rating. As expected, there were no violations of our FCPA and Ethics and Business Conduct policies and the Company was accident-free in 2015.



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Individual performance and operational results were combined with the Company performance results and weighted equally to determine each executive’s final annual incentive award. Target award levels for annual incentives are set at 100% of base salary for the CEO and 60% of base salary for the other named executive officers. For 2015 performance, the CEO and the other named executive officer’s individual awards were eligible for 65% of their bonus targets.  However, these bonuses have been deferred and will not be paid until the outcome of the sale of Gabon and/or resolution of the sale of Petrodelta.

Long-Term Incentive Compensation

Long-term incentive awards have been granted under our 2001, 2004, 2006 and 2010 Long Term Incentive Plans (“LTIPs”), and the awards are granted to our executive officers to align their personal financial interests with our stockholders. The LTIPs include provisions for stock options, stock appreciation rights (SARs), restricted stock, restricted stock units and cash awards.

Our policy on stock awards is focused on determining the right mix of retention and ownership requirements to drive and motivate our executive officers’ behavior consistent with long-term interests of stockholders. The Committee is the administrator of our LTIPs and, subject to Board of Director approval, has full power to determine the size of awards to our executives, to determine the terms and conditions of grants in a manner consistent with the LTIPs, and to amend the terms and conditions of any outstanding award.

The CEO presents individual stock award recommendations for executive officers to the Committee, and after review and discussion the Committee submits their recommendation to the Board of Directors for approval. The Committee’s policy is to grant awards on the date the Board of Directors approves them. Stock options, stock appreciation rights, restricted stock and/or restricted stock units will be granted once each calendar year on a predetermined date or at the effective date of a new hire or promotion, but not within six months of a previous award to the same individual. The price of options and the value of a restricted stock award issued to a new employee will be set at the closing price on the employee’s effective start date. The price of options and the value of a restricted stock award issued to an employee as a result of a promotion will be set at the closing price on the effective date of that promotion. Under no circumstances will a grant date be set retroactively.

The Board of Directors has adopted stock retention guidelines as an additional means to promote ownership of stock by executive officers and directors. The guidelines apply to any award of restricted stock or options to purchase our stock granted to executive officers and directors after February 2004. Under these guidelines, an executive officer or director must retain at least 50 percent of the shares of restricted stock for at least three years after the restriction lapses. Consequences for failure to adhere to these guidelines shall be determined by the Committee in its discretion including, without limitation, actions with respect to future compensation, and future grants of stock options or restricted stock and performance measures. Under our Insider Trading Policy, executive officers and directors are strictly prohibited from speculative trading including short sales and buying or selling puts or calls on the Company’s securities.

We believe the Company should have the ability to recover compensation paid to executive officers and key employees under certain circumstances.  On May 20, 2010, our stockholders approved the 2010 Long-Term Incentive Plan (the “2010 Plan”). This 2010 Plan allows us to recover any award which the Company deems was not warranted after any restatement of corporate performance.

The long-term incentive awards for 2015 included stock options, stock appreciation rights and restricted stock units. Stock appreciation rights can be settled as cash or equity.  This mix provides upside potential with the stock options/SARs and a more stable award in the form of restricted stock units.  Of the total award value, 70 percent was allocated to options and SARs and 30 percent to restricted stock units based on available shares.  As of April 30, 2016, the total shares available for grant under the LTIPs approved by our stockholders are as follows:





Personal Benefits

Our executive officers are covered under the same health and welfare and retirement plans, including our 401(k) plan, as all employees. The executive officers also receive supplemental life insurance to cover the risks of extensive travel required in conducting our global business. We pay 100 percent of all premiums for the following benefits for employees and their eligible dependents:

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We do not offer a pension plan or a non-qualified deferred compensation plan for executive officers or employees. In 2015, we did not offer perquisites to executive officers or other employees. We offer relocation and foreign service premiums to employees serving in an international location. The amount of the premium will vary depending upon the living conditions, political situation and general safety conditions of the international location. Expatriate employees are also provided housing and utilities allowances where applicable. They also receive a cost of living allowance to cover the differential between normal living expenses in the host and home countries, and will continue to participate in the employee benefit plans available to home country employees.

Total Direct Compensation

Executive Compensation Compared to Market Data

Compared to 2015 market data, total direct compensation ranged between 45th and 52nd percentile of the target market for all named executive officers.  In 2015, actual compensation fell at the following percentiles:





Tax and Accounting Implications of Executive Compensation

Deductibility of Executive Compensation

As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986 which imposes a limit of $1.0 million on the amount that a publicly-held corporation may deduct in any year for the compensation paid or accrued with respect to its named executive officers unless the compensation is performance based. None of our executive officers currently receives compensation exceeding the limits imposed by Section 162(m). While we cannot predict with certainty how executive compensation might be affected in the future by Section 162(m) or applicable tax regulations issued, we may attempt to preserve the tax deductibility of all executive compensation while maintaining our executive compensation program as described in this discussion and analysis.

Employment Agreements

We have entered into Executive Employment Agreements with our current named executive officers: Messrs. Edmiston, Haynes, Speirs, Nesselrode and Head. The contracts have an initial term that automatically extends for one year upon each anniversary unless a one-year notice not to extend is given to the executive. The current terms of the employment agreements are through May 31, 2016.





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See the table titled “Potential Payments under Termination or Change of Control” for details on the above information.

The Committee believes the termination payment included in these employment agreements is needed to attract and retain the executives necessary to achieve our business objectives. However, the Committee also believes termination payments should not be guaranteed. Accordingly, a termination payment will not be paid if a termination occurs after notice and lapse of the notice period to terminate the employment agreement. Also, a termination payment will not be made if the executive officer resigns other than for good reason. Good reason under the employment contracts includes: (1) a material breach of the employment agreement by the Company; (2) failure to maintain or reelect the executive officer to his position; (3) a significant reduction of the executive officer’s duties, position or responsibilities; (4) a substantial reduction, without good business reasons, of the facilities and perquisites available to the executive officer; (5) a reduction by the Company of the executive officer’s monthly base salary; (6) failure of the Company to continue the executive officer’s participation in any bonus, incentive, profit sharing, performance, savings, retirement or pension policy, plan, program or arrangement on substantially the same or better basis relative to other participants; or (7) the relocation of the executive officer more than fifty miles from the location of the Company’s principal office.

Change of Control

Since it is in our best interest to retain during uncertain times executive officers who will act in the best interests of the stockholders without concern for personal outcome, our Executive Employment Agreements provide benefits in the event of loss of employment for employees in good standing due to a change of control. Change of control is defined as the acquisition of 50 percent or more of our voting stock, the cessation of the incumbent board of directors to constitute a majority of the board of directors, or, in certain circumstances, the reorganization, merger, or sale or disposition of at least 50 percent of our assets where we are not the surviving entity. Change of control severance benefits apply to terminations taking place between 240 days before a change of control and 730 days after a change of control.







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The change of control benefits in the employment agreements contain a double trigger in that both a change of control must occur and the executive officer must be terminated without cause or resign for good reason within a specified period of time after the change of control. The Committee believes that the double trigger avoids unnecessarily rewarding an executive officer when a change of control occurs and the executive officer’s status is not changed as a result. However, because of the significant uncertainty that can arise during a period of a potential or actual change of control, the Committee has provided greater benefits to the executive officer in the event of a termination resulting from a change of control. Change of control benefits are detailed in the “Potential Payments under Termination or Change of Control” table in the Compensation of Executive Officers section.



HUMAN RESOURCES COMMITTEE REPORT

The Human Resources Committee has reviewed and discussed with management the Compensation Discussion and Analysis filed in this document. Based on such review and discussions, the Human Resources Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amended Report.

R. E. Irelan, Committee Chairman

Edgard A. Leal

Patrick M. Murray



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COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table



The following table summarizes the compensation of the Company’s named executive officers for the three most recently completed fiscal years ended December 31, 2015, 2014  and 2013.









Grants of Plan-Based Awards



The following table shows information concerning options to purchase our  common stock granted to each of our named executive officers during 2015.





Notes:



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Outstanding Equity Awards at Fiscal Year End



The following table shows information concerning outstanding equity awards as of December 31, 2015 held by the named executive officers.

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Options Exercised and Stock Vested



No options were exercised and no restricted stock vested in 2015. 





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Potential Payments under Termination or Change of Control



The tables below reflect the additional compensation to the named executive officers of the Company under the terms of their Executive Employment Agreements in the event of termination without cause or without proper notice, termination following change of control, or termination for disability or death. (See Compensation Discussion and Analysis — Employment Agreements and Change of Control above for a description of the terms of the Executive Employment Agreements.) The amounts shown in the tables assume that such termination was effective as of December 31, 2015, and thus include estimated amounts earned through that date that would be paid out to the named executive officers. The actual amounts can only be determined at the time of separation from the Company.  Accelerated vesting of stock awards is based on a December 31, 2015 Harvest closing stock price of $0.43.



*  until no longer disabled or Social Security Retirement Age







*  until no longer disabled or Social Security Retirement Age







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*  until no longer disabled or Social Security Retirement Age









*  until no longer disabled or Social Security Retirement Age







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*  until no longer disabled or Social Security Retirement Age



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DIRECTOR COMPENSATION

Our philosophy in determining director compensation is to align compensation with the long-term interests of the stockholders, adequately compensate the directors for their time and effort and establish an overall compensation package that will attract and retain qualified directors. In determining overall director compensation, we seek to strike the right balance between the cash and stock components of director compensation. The Board’s policy is that the directors should hold equity ownership in the Company and that a portion of the director fees should consist of Company equity in the form of restricted stock and stock grants. The Board also believes that directors should develop a meaningful equity position over time and has adopted stock retention guidelines applicable to all directors. These guidelines state directors must retain (i) at least 50 percent of the shares of restricted stock granted to them for at least three years after the restriction lapses and (ii) at least 50 percent of the net shares of stock received through the exercise of an option or stock appreciation right must be retained by a director for at least three years after the exercise date.

Our retainer and meeting fee schedule has remained the same since June 2014.  Each non-employee director of the Company received cash compensation as follows:

Our director compensation includes additional compensation for the non-executive Chairman of the Board in recognition of the significant added responsibilities and time commitments of that position. In addition to his compensation as a director, he receives a retainer of $120,000 a year; this 2015 retainer remained the same as the retainer in 2014, 2013, 2012 and 2011.

Under the Harvest Natural Resources 2010 Long Term Incentive Plan, directors are eligible to receive restricted stock, restricted stock units (RSU), stock options and stock appreciation rights (SAR) grants. In September 2015, the Board approved a restricted stock unit award valued at $80,001 for each director.

The following table sets forth the cash and other compensation earned by the non-employee members of our Board of Directors in 2015.

 





Note:  Restricted share units (RSUs) were issued on September 9, 2015 at a price of $1.50 per share with a vesting of one year from grant date. 



HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

From January 1, 2015 until June 19, 2015, our Human Resources committee consisted of R. E. Irelan as Chairman, Igor Effimoff and J. Michael Stinson.  On June 19, 2015, in connection with a financing involving CT Energy Holding SRL, the Company’s Board of Directors accepted the resignations of Dr. Effimoff, Mr. Hardee and Mr. Stinson and appointed Mr. Oswaldo Cisneros, Mr. Francisco D’Agostino and Mr. Edgard Leal, as Board members, effective the same date.  The Human Resources committee of the Board is currently comprised of Mr. Irelan as Chairman, Mr. Leal and Mr. Patrick M. Murray.    None of the members of the Board’s Human Resources Committee is or has been an officer or employee of the Company or has a relationship requiring disclosure under Item 404(a) of SEC Regulation S-K. No executive officer of the Company serves on the compensation committee or serves as a director of another entity where an executive officer of that entity also serves on the Human Resources Committee or on the Board.  







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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

STOCK OWNERSHIP

Directors and Named Executive Officers

The following table shows the amount of our common stock beneficially owned (unless otherwise indicated) by our directors, each named executive officer and our directors and named executive officers as a group. Except as otherwise indicated, all information is as of March 31, 2016.  

The number of shares of our common stock beneficially owned by each director or named executive officer is determined under rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days after March 31, 2016 through the exercise of stock options or other rights. Unless otherwise indicated, each person has sole investment and voting power (or shares such powers with his spouse) with respect to the shares set forth in the following table.





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Certain Beneficial Owners

The following table shows the beneficial owners of more than five percent of the Company’s common stock as of March 31, 2016 based on information available as of that date:





.EQUITY COMPENSATION PLAN INFORMATION

Information concerning our equity compensation plans as of December 31, 2015 is included in our Form 10-K filed March 29, 2016, Part IV, Item 15, Notes to the Consolidated Financial Statements, Note 15 – Stock-Based Compensation and Stock Purchase Plans, which disclosure is incorporated by reference herein.



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Item 13. Certain Relationships and Related Transactions, and Director Independence

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our Code of Business Conduct and Ethics (the “Code”) applies to all of our directors, officers and employees. Under the Code, individuals subject to the Code and their family members must knowingly avoid owning any interest (other than nominal amounts of stock in publicly-traded companies) in any supplier or customer; consulting with, or being an employee of, any customer, lessor, lessee, contractor, supplier or competitor; purchasing from, or selling to us, assets, goods or services; or serving on the board of directors of any customer, lessor, lessee, contractor, supplier or competitor, except where full disclosure of all facts is made known to us in advance to permit us to protect our interests. Each year we require our executive officers to certify their compliance with the Code. Our Audit Committee has oversight compliance responsibilities for the Code. Exceptions to the Code are reported to the Audit Committee. Waivers of the Code for officers and directors may only be granted by the Board and waivers for employees may only be granted by the CEO and reported to the Audit Committee. No waivers of the Code were granted in 2015. In addition to the Code, each year we require our directors and executive officers to disclose in writing certain transactions and relationships and this information is used in preparing this report and the proxy statement and in making independence determinations for directors.

For the purposes of this report, the Company has the following transactions to describe pursuant to SEC Regulation S-K Item 404(a):

On June 19, 2015, Harvest sold to CT Energy the 15% Note, the 9% Note and the Series C preferred stock.  Shortly after this transaction, two representatives of CT Energy, Mr. Oswaldo Cisneros and Mr. Francisco D’Agostino, were appointed to Harvest’s Board of Directors.  Mr. Cisneros is the sole owner of CT Energy and Mr. D’Agostino is a controlling equity owner of CT Energia.  On September 15, 2015, CT Energy converted the 9% Note, including accrued interest, into 8,667,597 shares of Harvest’s common stock and Harvest redeemed the Series C preferred stock.  See Part IV – Item 15 – Exhibits and Financial Statements Schedules, Note 1 – Organization and Note 20 – Subsequent Events for more information about the CT Energy transaction. 



DIRECTOR INDEPENDENCE

Of our current seven directors, four have been affirmatively determined by the Board to be independent, including our non-executive Chairman of the Board. The directors our Board has determined to be independent are Stephen D. Chesebro’, Robert E. Irelan, Edgard Leal and Patrick M. Murray. The Board’s determination of independence is based upon the standards set forth in its Guidelines for Corporate Governance, which may be found under the Corporate Governance section on our website at http://www.harvestnr.com. The Guidelines for Corporate Governance include the New York Stock Exchange independence standards. In making its determination of independence, the Board took into account responses of the directors to questions concerning their employment history, compensation, affiliations and family and other relationships.





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Item 14. Principal Accountant Fees and Services

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BDO USA, LLP (“BDO”) is our independent registered public accounting firm.  On December 1, 2014, UHY LLP ("UHY") informed Harvest that, effective on that date, UHY’s Texas practice had been acquired by BDO USA, LLP ("BDO") (the "UHY Acquisition"). As a result of the UHY Acquisition, effective December 1, 2014, UHY resigned as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2014 and BDO became our independent registered public accounting firm. UHY previously served as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of the Company for the fiscal year ended December 31, 2013.

The following is a summary of the fees for professional services rendered by BDO and UHY for each of the years ended December 31, 2015 and December 31, 2014.

Audit Fees.    The aggregate fees billed by BDO and UHY for each of the last two fiscal years for professional services rendered in connection with the audit of our annual financial statements and review of financial statements included in our quarterly reports and services that are normally provided by them in connection with statutory and regulatory filings or engagements for the year ending on December 31 were as follows:







All of the foregoing fees were approved by the Audit Committee.

Audit Committee Pre-Approval Policies and Procedures. The Audit Committee’s Charter provides that our independent registered public accounting firm may provide only those services pre-approved by the Audit Committee, subject to de minimis exceptions for non-audit services described in the rules and regulations of the SEC, which are subsequently ratified by the Audit Committee prior to completion of the audit. The Audit Committee annually reviews and pre-approves the audit, review, attestation and permitted non-audit services to be provided during the next audit cycle by the independent registered public accounting firm. To the extent practicable, at the same meeting the Audit Committee also reviews and approves a budget for each of such services.

The Audit Committee may delegate to a member(s) the authority to grant pre-approvals under its policy with respect to audit and permitted non-audit services, provided that any such grant of pre-approval shall be reported to the full Audit Committee no later than its next scheduled meeting.

The Audit Committee has concluded that the provision of non-audit services is compatible with maintaining the registered public accounting firm’s independence.



PART IV

Item 15. Exhibits and Financial Statement Schedules

(b)3.Exhibits.



31.1Certification pursuant to Rule 13a-14(a)/15d-14(a) executed by James A. Edmiston, President and Chief Executive Officer.

31.2Certification pursuant to Rule 13a-14(a)/15d-14(a) executed by Stephen C. Haynes, Vice President, Chief Financial Officer and Treasurer







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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



HARVEST NATURAL RESOURCES, INC.

(Registrant)



Date:April 29, 2016By:/s/ Keith L. Head

Keith L. Head

Vice President and General Counsel









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