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1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-8933
APCO ARGENTINA INC.
(Exact name of registrant as specified in its charter)
CAYMAN ISLANDS -
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. BOX 2400
TULSA, OKLAHOMA 74102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 588-2164
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None None
Securities registered pursuant to Section 12(g) of the Act:
ORDINARY SHARES $.01 PAR VALUE (TITLE OF CLASS)
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 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]
The aggregate market value of the voting stock of the registrant held
by non-affiliates of the registrant on March 8, 1996, was $41,414,638. This
value was calculated based upon the average bid and asked prices of the
registrant's stock of $17.125 on March 8, 1996, as reported to the Company by
the National Association of Securities Dealers. Since the shares of the
registrant's stock trade sporadically in the over-the-counter market, the bid
and asked prices and the aggregate market value of stock held by non-affiliates
based thereon may not necessarily be representative of the actual market value.
See Item 5.
At March 8, 1995 there were outstanding 7,360,195 shares, $.01 par
value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference
and the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated:
None
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P A R T I
ITEM I. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
Apco Argentina Inc. is a Cayman Islands corporation which was
organized April 6, 1979 as a successor to Apco Argentina Inc., a Delaware
corporation organized July 1, 1970. The principal business of the Company is
its 47.6 percent participation in a joint venture engaged in the exploration,
production, and development of oil and gas in the Entre Lomas concession
located in southern Argentina. The Company also owns a 1.5 percent
participation in the Acambuco joint venture, an oil and gas exploration and
development project located in northwest Argentina.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
None.
(C) NARRATIVE DESCRIPTION OF BUSINESS
ENTRE LOMAS
The Company participates in a joint venture with Petrolera Perez
Companc S.A. ("Petrolera") and Maipu Inversora S.A., the current owner of the
participation interest originally held by Perez Companc S.A. Both partners are
Argentine companies. The purpose of the joint venture is the exploration and
development of the Entre Lomas oil and gas concession in the provinces of Rio
Negro and Neuquen in southern Argentina. The Company's interest in the joint
venture totals 47.6 percent of which 23 percent is a direct participation and
24.6 percent is owned indirectly by virtue of the Company's 33.6 percent stock
ownership in Petrolera, the operator of the joint venture. Petrolera owns a
73.15 percent direct interest in the joint venture.
YPF CONTRACTS
In 1967, Yacimientos Petroliferos Fiscales ("YPF") sought bids
for the development of the Entre Lomas area. Perez Companc won the bidding.
Contract No. 12,507, dated March 13, 1968, between YPF and Perez Companc
permitted the Entre Lomas joint venture to explore for, develop, and produce
oil in the Entre Lomas area. Similar contracts with YPF with respect to
natural gas produced and liquids extracted from natural gas were entered into
on November 18, 1970, and February 10, 1977, respectively. Originally, the
joint venture's interests in the Entre Lomas area were derived from such
contracts and not from direct ownership of the mineral resources involved.
Under existing Argentine hydrocarbon laws, the Argentine government retains
ownership of the minerals in place.
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JOINT VENTURE AGREEMENTS
On April 1, 1968, Perez Companc and Petrolera entered into a
joint venture agreement with Apco Oil Corporation pursuant to which Petrolera
became operator of the Entre Lomas area. On July 1, 1970, Apco Oil Corporation
transferred its interest in the Entre Lomas area to Apco Argentina Inc.
Similar joint venture agreements among the Company, Perez Companc and Petrolera
for the development of natural gas and extraction of propane and butane were
entered into February 29, 1972, and March 23, 1977, respectively.
DEREGULATION
The Argentine government, in an effort to implement a program to
establish complete deregulation of the energy industry in Argentina, issued
three decrees from August through December 1989. On November 8, 1989, decree
1212/89 was issued describing steps necessary to deregulate hydrocarbon
production from existing production and development contracts, including Entre
Lomas. The decree directed YPF to negotiate with producers the conversion of
contracts to the concession or association system described in the 1967
Hydrocarbon Law 17,319, and gave owners of the converted contracts the right to
freely dispose of their share of hydrocarbons produced at world prices.
Complete deregulation of the Entre Lomas area was accomplished in two stages.
On December 26, 1990, a conversion agreement among Petrolera,
acting on behalf of the Entre Lomas joint venture, YPF and the Argentine
government was finalized and executed. Under the agreement, which went into
effect January 22, 1991, the Entre Lomas contract was converted to a concession
giving the joint venturers ownership of produced oil at the wellhead and
enabling them to freely sell their oil in internal or external markets. YPF
received the right to take in kind 8 percent of all oil produced from the
concession over the remaining life of the contract, and undertook to transport
to a point of market and store all oil produced in the area at no charge. The
joint venturers became responsible for the payment of provincial royalties
equivalent to 12 percent of sales value adjusted for marketing costs. Natural
gas produced beyond a certain level, defined by a production decline curve,
along with all natural gas liquids produced, could be freely disposed of by the
joint venturers. The volumes defined by the production decline curve were to
be delivered to YPF with the joint venturers continuing to receive the
exploitation and capital account prices, as specified under terms of the
original gas contract. The remaining balance of the gas capital account
payable to the joint venturers by YPF was to be repaid or amortized by future
gas deliveries to YPF. Finally, the life of the concession, which was to expire
in the year 2003 under contract 12,507, as amended, was extended through 2015.
An option to extend the concession for an additional ten years, was granted to
the joint venture.
In February 1994, certain terms of the above described conversion
agreement were modified. Such modifications severed all links between YPF and
the Entre Lomas joint venture which remained pursuant to the original 1968
Entre Lomas contract. Effective March 1, 1994, the joint venture assumed
responsibility for the costs of transportation, treatment and storage of oil
produced in Entre Lomas and YPF relinquished its right to take in kind eight
percent of the oil produced in the concession. In addition, deliveries of
natural gas to YPF were no longer required, entitling the joint venturers to
sell all gas produced in the open market. Finally, YPF paid the joint venture
$8.7 million as payment for the outstanding
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balance of the gas capital account and other costs to be incurred by the joint
venture as a result of the modifications. These changes completed the
evolution of the Entre Lomas contract from an oil production service contract
to an oil and gas exploration and production concession pursuant to the 1967
hydrocarbon law 17,319.
SALE OF OIL
The Entre Lomas concession is currently participating in several
contracts negotiated by the Perez Companc group. This arrangement allows the
joint venturers to pool Entre Lomas oil with other concessions in the Medanito
area providing greater negotiation strength with Argentine refiners and in
export markets.
All contracts which were in effect during 1994, expired during
the year, and have been replaced with four new contracts which have terms that
run through staggered dates in 1996. Under the new contracts, approximately
one quarter of the concession's production is exported to Petrobras, the
Brazilian national oil company. The remainder is sold to three Argentine
refineries. No single customer purchases more than twenty-seven percent of
the concession's production.
The per barrel price for Argentine oil continues to be based on
the spot market price of West Texas Intermediate crude less a discount. This
discount has been declining steadily since Argentina's oil industry was
deregulated. The average weighted discount in effect for the current sales
contracts is $1.60, as compared with $2.18 for contracts in effect in 1994,
and $2.50 for contracts in effect in 1993. Due to weight and quality
differences between West Texas Intermediate crude oil and Entre Lomas oil, a
base level discount will ultimately be reached.
As described, all existing contracts expire at different times in
1996. Excellent demand exists for Medanito area crude oil because of its
relative quality and favored geographical location. Management is confident,
that upon expiration, these contracts can be extended or replaced.
SALE OF GAS
In March 1994, the Entre Lomas joint venturers entered into a gas
sales agreement with Litoral Gas S.A., the gas distribution company for the
province of Santa Fe. Under the agreement, the joint venturers provide 28
million cubic feet of gas per day during peak winter months and 25 million
cubic feet per day during the remainder of the year. The price paid by the
purchaser varies depending on seasonal demand. During 1995, prices averaged
$1.23 per thousand cubic feet ("mcf"), and are scheduled to escalate gradually
to an average of $1.34 per mcf during the final year. Provisions exist to
adjust the contract price should it diverge too much from the average sale
price of gas produced in the Neuquen basin. The term of the contract is five
years.
As described on pages 6 and 7, under "Gas Development", the Entre
Lomas joint venture partners are currently developing a new gas field in the
central part of the concession. Production from this field commenced in July
1994. To date, the joint venturers, through a temporary arrangement, have been
successful selling this additional gas stream to Megrogas S.A. Spot market
sales to other local distribution companies have also occurred during periods
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of peak gas demand. During the winter month of August, daily sales volumes
from the concession reached an average of 40 million cubic feet.
The joint venturers are currently seeking a long term outlet for
gas production in excess of the volume commitment to Litoral S.A. The success
of this undertaking will depend on the ultimate outcome of development efforts
in this new field.
TRANSPORTATION
Oil produced in the Entre Lomas concession is sold in Puerto
Rosales and is shipped through the Oleoductos de Valle S.A. ("Oldelval")
pipeline system. From the concession, oil is transported through the joint
venture's 8 inch, 6 3/4 mile pipeline. This line has a capacity of 16,000
barrels per day and is directly connected to the Medanito-Allen leg of the
system. Medanito-Allen, with a daily capacity of 130,000 barrels, transports
oil to Allen terminal. Two Oldelval lines, originating in Allen, with a daily
capacity of 175,000 barrels, complete the journey to Puerto Rosales.
Currently, the Entre Lomas joint venture's allocation in this pipeline system
is 11,600 barrels per day. The system at this time is operating at 90 to 95
percent of capacity.
The cost to transport oil through this system and use the storage
and handling facilities in Puerto Rosales averaged $1.06 per barrel in 1995.
Current transportation tariffs were established by government decree in 1992.
PETROLERA
Petrolera was established for the express purpose of carrying out
production and development operations in the Entre Lomas area. Major
investment and distribution decisions are made by the joint venture and
implemented by Petrolera. Petrolera has a board of 15 directors, 7 of whom are
nominees of the Company and 8 of whom are nominees of Perez Companc or its
affiliates. Petrolera's senior officers are generally the same as those of
Perez Companc with other general office and field personnel being employed
exclusively by Petrolera. The Company understands that Petrolera's sole
business at present is its role as joint venture operator.
With the assistance of its branch office in Buenos Aires, the
Company obtains operational and financial data with which it monitors joint
venture operations. The branch also provides technical assistance to Petrolera
and makes recommendations regarding field operations.
DISTRIBUTIONS AND DIVIDENDS
During 1995, the Company received direct distributions of $4.5
million and Petrolera dividends of $2.7 million. Future distributions will be
dependent on the joint venture's ability to generate future profits and the
level and timing of future investments in the area. Pursuant to a joint
venture agreement dated January 31, 1986, whenever, during a two-month period,
cash available to the joint venture exceeds its requirements and commitments,
such excess shall be distributed, as soon as practicable, to the joint
venturers.
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OIL AND GAS INFORMATION
The Entre Lomas concession is located about 950 miles southwest
of the city of Buenos Aires on the eastern slopes of the Andes mountains. It
straddles the provinces of Rio Negro and Neuquen approximately 100 kilometers
north of the city of Neuquen. The concession produces oil and gas primarily
from the Charco Bayo/Piedras Blancas field complex ("CB/PB"). Two smaller
fields, the Entre Lomas and El Caracol fields, located to the northwest of the
main field complex also produce oil.
The most prolific oil producing formation is called Tordillo
which in the CB/PB field has generated 83% of all the oil produced in the
concession. The Tordillo also produces associated gas which is consumed for
field operations. Propane and butane are extracted from this gas in the joint
venture's gas processing plant. Other important formations are the Quintuco,
which produces gas in CB/PB and oil in the Entre Lomas and El Caracol fields.
Since inception 393 wells have been drilled in the concession, of which at year
end, 279 are oil wells, 20 are gas wells and 81 are water injection wells.
Reference is made to page 12 which presents this information in tabular form.
The CB/PB and the El Caracol fields are secondary recovery
projects. Water injection has been introduced in CB/PB in phases since 1975.
There still exist areas in CB/PB, primarily those developed since 1986, which
lack injection. The El Caracol field has been under injection since 1989.
CHARCO BAYO/PIEDRAS BLANCAS FIELD
Production in the CB/PB field commenced in 1968, with the largest
part of this complex developed before 1974. Additional development drilling
has since continued occurring primarily during the 1979-1981 and 1986-1988
drilling campaigns. These two campaigns were the result of renegotiations of
the original Entre Lomas contract. Secondary recovery was introduced with a
successful pilot in 1975 and has slowly been expanded to include 71 injection
wells. CB/PB can best be described as a mature oil field with remaining
potential. Development of this field has historically been gradual due to the
sporadic nature of past major investment programs which, until the Entre Lomas
area was converted to a concession, occurred as a result of major
renegotiations of the original contract.
The future ultimate development of CB/PB is likely to result from
a combination of expansion of secondary recovery throughout the entire
producing field, selective infill drilling, continued step out drilling, and
recompletion of existing wells with behind pipe reserves. The results of these
programs can be enhanced, and higher percentage recoveries achieved, by
improving the efficiency of the waterflood through various means. Such means
include substantially increasing the rate of water injection in areas of the
field already under flood, increasing lift capacity to handle greater volumes
of fluid by accelerating the conversion of wells from gas lift to pump, placing
idle wells back on production, attempting to reduce the effects of channeling
of injection water through the use of polymer treatments of both injection and
producing wells, and by modifying existing patterns of injection.
Although the CB/PB waterflood has been in operation since 1975,
there has been insufficient water injected in some areas of the field already
under injection and other areas
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in which there has not been injection to date. As a result, recoveries
normally attributed to waterfloods after 15 to 20 years have not been attained
and it is currently estimated that this field has a remaining productive life
in excess of twenty years. Expansion and improvement of secondary recovery
throughout this field is a primary emphasis for the joint venture.Insofar as
future drilling activity in the CB/PB field, it is felt that the oil/water
contact, or the lowest structural point at which oil can be produced, is fairly
well defined. Nevertheless, there remain undrilled step out locations in the
flanks of the structure and selective infill locations which should be drilled
in order to produce from areas of the field not currently drained by existing
wells. The level of development drilling activity in CB/PB will, of course, be
dependent on an oil price level that provides adequate returns for the joint
venture partners.
In the CB/PB field, the Quintuco formation is gas productive.
Approximately 55 percent of the gas sold by the joint venturers is produced
from a few gas wells interspersed among the many Tordillo oil wells located on
this structure. Quintuco gas reserves in this field are believed to be fully
developed and, until 1994, comprised virtually all of the company's proved gas
reserves.
EL CARACOL FIELD
The El Caracol field is located in the northwestern most part of
the concession. This field produces oil from the Quintuco formation. Thirty
one wells have been drilled here to date. Additional development drilling
potential may still exist. Water injection began here in 1989 and response has
been favorable.
ENTRE LOMAS FIELD
The Entre Lomas field is located in the central part of the
concession to the northwest of CB/PB. This anticlinal structure is cut by a
fault near its crest. The oilfield exists on the southwest/upthrown side of the
fault. Although the field has additional development drilling potential as
indicated by the structural position and formation development in the two wells
drilled in 1995 and those drilled in the two prior years, the field is showing
signs of pressure depletion and is a candidate for secondary recovery.
The Quintuco formation, which responded favorably to
waterflooding in the El Caracol field, is the principal producing formation in
this field. Studies which attempt to predict the reaction of this field to
water injection are almost complete. Investments to implement secondary
recovery are currently scheduled to commence during the second half of 1996.
GAS DEVELOPMENT
In 1970, a well known as the Entre Lomas 4 ("EL 4") was drilled
and discovered what appeared to be significant gas potential from several
sections in the Petrolifera formation. As described above, the Entre Lomas oil
field produces from the southwest/upthrown side of a fault that runs through
the center of the Entre Lomas structure. EL 4 is located on the downthrown
side of the same fault. Another well drilled early in the
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life of the concession, which is a significant distance from EL 4 but is on the
same side of this fault, was drilled and also found the Petrolifera to be gas
productive. EL 4 was never produced due to its remote location and lack of
market. In 1989, this well experienced casing problems and is believed, over a
period of months, to have lost an unknown quantity of gas before repairs could
be carried out.
As part of the recent settlement with YPF, described under
"Deregulation", on page 2, the Entre Lomas joint venture's obligation to
deliver gas to YPF, under terms of the original contract, ceased. The joint
venture was successful in quickly finding a market for its natural gas at a
price substantially higher than formerly received from YPF. This event, in
combination with deregulation of the gas industry in Argentina, has fueled
considerable interest in gas development in the concession.
On the basis of these developments, EL 4 was tested with good
results. Subsequently, a gas pipeline was built from this area to the
concession's main facilities and the well was placed on production in August
1994 at an initial rate of 8 million cubic feet per day. The decision was made
to drill step out wells and determine the extent of Petrolifera development in
this sector of the concession. The first step out location, the Entre Lomas
1-g, drilled during the last quarter of 1994, found good Petrolifera
development in a favorable structural position. This well, however, has been a
poor producer due to the existence of a complex faulting near the well bore
which was not detected with the 2D seismic used to select the location. The
joint venture then undertook a 3D seismic program over a 90 square mile
kilometer surface rectangle which included the area of gas development
potential.
The next three wells, Entre Lomas 2-g, 3-g and 5-g were drilled
during 1995 with successful results, finding good Petrolifera development in
favorable structural positions and extending the area of potential development
to the northwest. The 2-g and 3-g wells were placed on production
intermittently during the winter season in Argentina as the joint venturers
were able to sell gas into the spot market and through a temporary arrangement
described on page 3, under "Gas Sales". Both wells produced for brief periods
at rates reaching 10 million cubic feet per day. The Entre Lomas 5-g well,
although not yet placed on production, tested volumes of approximately 10
million per day.
Late in the year, the Entre Lomas 6-g was drilled as a step out
location to the northeast, in a location that seismic interpretations indicated
would be considerably downdip. The well was completed and tested in February
1996. The Petrolifera formation was well developed at this location and the
structural position indicated by the seismic was confirmed. However, this well
appears to have found the northeast limits of this field in that production
testing resulted in one hundred percent water.
Pipeline capacity inside the concession is now being expanded in
order to increase deliverability from this new field. Additional wells to
define the extent of this field to the northwest will be drilled in the second
half of 1996.
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PROVED RESERVES
The following tables summarize, for each of the years presented,
significant changes in the quantities of proved oil and gas reserves through
the term of the concession assuming exercise of the option to extend the term
through 2025.
Entre Lomas Joint Venture
Summaries of Net Proved Reserves
(Applicable to the Company's Interest)
Total proved oil, condensate and
plant product reserves (Millions of Barrels)
------------------------------------
1995 1994 1993
---- ---- ----
Beginning of year 39.5 23.5 60.0
Revisions of previous
estimates (0.7) 17.6 (37.5)
Additions 0.4 0.2 0.8
Acquisitions - - 1.8
Production (1.8) (1.8) (1.6)
---- ---- ----
End of Year 37.4 39.5 23.5
==== ==== ====
Proved developed oil reserves 25.1 25.5 23.5
==== ==== ====
Total proved gas reserves (Billions of cubic feet)
------------------------------------
1995 1994 1993
---- ---- ----
Beginning of year 33.8 25.6 27.6
Revisions of previous
estimates (1.6) (0.7) 2.5
Additions 27.1 14.5 -
Production (5.8) (5.6) (4.5)
---- ---- ----
End of Year 53.5 33.8 25.6
==== ==== ====
Proved developed gas reserves 47.8 32.5 25.6
==== ==== ====
There were no estimates of total proved net oil or gas reserves
filed with any other United States Federal authority or agency during 1995.
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The following table summarizes as of December 31, for each of the
years presented, the standardized measure of discounted future net cash flows
from proved oil and gas reserves that could be produced through the term of the
concession, assuming exercise of the option to extend the term through 2025.
Entre Lomas Joint Venture
Standardized Measure of Discounted Future Net Cash Flows
From Proved Oil and Gas Reserves
(Applicable to the Company's Interest)
(Millions of U.S. Dollars)
---------------------------------
1995 1994 1993
---- ---- ----
Future revenues (1 and 2) $732 $676 $328
Future expenditures (3) 401 391 207
---- ---- ----
331 285 121
Argentine taxes (4) 90 77 27
---- ---- ----
Future net cash flows 241 208 94
Less 10% annual discount for
estimated timing of cash flows 127 113 39
---- ---- ----
Discounted future net cash flows $114 $ 95 $ 55
==== ==== ====
(1) Estimates are made of quantities and timing of future production of oil
and gas reserves.
(2) Estimates of gross revenues from sales are made using prices in effect
at December 31 for each year presented. The per barrel price for 1995
is $17.58, as compared with $15.87 and $12.28 for 1994 and 1993,
respectively. Gas prices for all years are based on prices provided by
gas sales contracts in effect during the respective years. Production
forecast beyond the term of gas sales contracts currently in effect, are
assumed to be sold under the same contract terms.
(3) Estimated production, transportation, marketing and development costs
are based on the current cost of similar services and include all future
capital expenditures.
(4) Estimated taxes consider all taxes to which the Company is subject in
Argentina.
(5) Conversion to U.S. dollars is made utilizing the rate of exchange at
December 31 for each of the years presented.
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DISCOUNTED FUTURE NET CASH FLOWS PRESENTED HEREIN MAY NOT BE
RELIABLE DUE TO THE IMPRECISION OF ESTIMATING REMAINING RECOVERABLE RESERVES.
ESTIMATES OF OIL AND GAS RESERVES AND RATES OF FUTURE PRODUCTION ARE INHERENTLY
IMPRECISE AND CHANGE OVER TIME AS NEW INFORMATION BECOMES AVAILABLE. AS A
RESULT, SUBSEQUENT REVISIONS OF THE QUANTITY AND VALUATION OF PROVED RESERVES
MAY BE SIGNIFICANT.
The following analysis summarizes for each of the years presented
the increases (decreases) in the amount of discounted future net cash flows
attributable to the estimate of the Company's proved oil and gas reserves.
Entre Lomas Joint Venture
Analysis of Changes in Standardized Measure of
Discounted Future Net Cash Flows From Proved Oil and Gas Reserves
(Applicable to the Company's Interest)
(Millions of U.S. Dollars)
----------------------------------
1995 1994 1993
---- ---- ----
Prices and costs:
Net changes in prices and
production costs $12 $10 $(76)
Quantities:
Revenues, net of
production costs (11) (23) (15)
Additions and revisions
of previous estimates - net 14 111 (140)
Other:
Changes in estimated
future development costs (2) (36) 112
Accretion of discount 13 7 13
Net changes in Argentine
taxes (8) (24) 56
Timing of future
production and other 1 (5) 16
--- --- ----
Net increase (decrease) in
discounted future net
cash flows $19 $40 $(34)
=== === ====
The increase (decrease) for all years reflects the impact of
changes in oil and gas prices on the economic viability of development drilling
in the concession and thus the quantities of reserves qualifying as proved.
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The following table shows total sales of crude oil and condensate
and natural gas from the Entre Lomas field and average sales prices and
production costs for the last three years, based on data supplied to the
Company by Petrolera.
Entre Lomas Joint Venture
Sales and Price Statistics
1995 1994 1993
-------------- -------------- --------------
Total Sales-Gross
Crude Oil and Condensate (bbls) 3,441,973 3,544,643 3,558,020
Gas (mcf) 12,242,384 11,780,564 9,495,121
LPG (tons) 15,764 18,126 17,361
Total Sales-Net to Company
Crude Oil and Condensate (bbls) 1,638,379 1,687,250 1,693,618
Gas (mcf) 5,827,375 5,607,548 4,519,678
LPG (tons) 7,504 8,628 8,264
Average Sales Prices (in U.S. Dollars)
Oil (per bbl) $ 16.67 $ 15.11 $ 16.04
Gas (per mcf) 1.23 1.05 .80
LPG (per ton) 166.33 149.95 154.66
Average Production Costs (in U.S. Dollars)
Oil (per bbl) $ 7.13 $ 6.45 $ 5.17
Gas (per mcf) .19 .15 .11
LPG (per ton) 65.47 53.24 55.24
Volumes presented in the above table represent those sold to
joint venturers' customers and have not been reduced by the 12 percent
provincial royalty, which is paid separately and is accounted for as an expense
by the joint venture. In calculating royalty payments, the joint venturers are
entitled to deduct gathering, storage, treating and compression costs.
Average production cost is calculated by taking into
consideration all costs of operating the Entre Lomas area, including the costs
of remedial well workovers and depreciation of property and equipment.
Variations in production costs have in the past been influenced
by inflation and fluctuations in the value of the local currency versus the
dollar over time.
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Total wells from all acreage in which the Company has an interest
for the years ended December 31, 1995 and 1994, are as follows:
1995 1994
------------ ------------
Gross Net Gross Net
----- --- ----- ---
Oil 279 133 279 133
Gas 20 10 18 8
Abandoned and Inactive 13 6 12 6
Injection 81 38 73 35
--- --- --- ---
Total 393 187 382 182
=== === === ===
Total capital expenditures by the Entre Lomas joint venture for
1995 amounted to $21 million all related to development activities. Major
development expenditures included drilling and completing 7 oil wells and 3 gas
wells, conversion of 8 producing wells to injection, increases in lift
capacity, installation of a telemetering system in the concession, improvements
in the concession's hydrocarbon recovery unit, and costs associated with
designing and building facilities to reinject produced water in the concession.
Remedial well workovers are charged to operating expense. During
1995, the joint venture expended almost $5 million on workovers and polymer
treatments of both producing and injection wells.
Exploration expenditures for 1995 totaled $1.5 million and
represent costs of completing a 3D seismic program initiated in the prior year.
Development expenditures in 1994 and 1993 totaled $8 million and
$15 million, respectively. Remedial well workovers for 1994 and 1993 totaled
$3 million and $2 million, respectively, and exploration expenditures, for the
same years totaled $4 million and $3 million respectively.
In 1992, Argentina passed environmental control legislation in
the form of Law 2,391. As a result, investments were made in 1993 to
temporarily improve the concession's existing system of produced water
disposal. Fresh water has previously been the sole source of injection in both
waterflood projects in the concession. As a result, produced water has
previously been disposed of in evaporation and filtration pits. During 1994, a
system to reinject produced water was designed and approved by the governing
provinces. Estimated to cost in excess of $5 million, these facilities are now
being built and are scheduled to go into operation by mid 1996.
The Entre Lomas field consists of approximately 183,000 acres, of
which 32,971 acres are presently producing. The Company's 47.6 percent
interest is equivalent to approximately 87,000 total net acres and 15,694
producing net acres.
-12-
14
The aggregate amounts of capitalized costs related to the
Company's oil and gas producing activities are as follows:
(Thousands of U.S. Dollars)
---------------------------
1995 1994
------- -------
Proved oil and gas properties $44,028 $34,476
Accumulated depreciation,
depletion and amortization 16,850 10,940
------- -------
Net capitalized costs $27,128 $23,536
======= =======
EXPLORATION
The Entre Lomas concession consists of 183,000 acres of which
32,971 acres are presently producing. Since 1960, when the first exploration
well was drilled, there have been drilled inside the concession 393 wells of
which only a few have been drilled significant distances from the main
producing fields. Although the joint venture believes the major producing
structures have been identified and are being developed, the concession remains
relatively unexplored. The Joint venturers are now in the midst of an effort
to identify additional unexplored hydrocarbon accumulations which may exist
inside the concession boundaries.
In 1993, the partners completed an intensive seismic program
which included reprocessing seismic shot in prior years and shooting
approximately 300 miles of new 2D seismic. The results of this program were
interpreted and several structures identified as potential drilling targets.
These new prospects target both oil and gas in formations known to be
productive in the concession, including the Tordillo, Quintuco and Petrolifera
formations. In addition, it is the joint venture's intention to test deeper
formations which have never been investigated in the concession.
In early 1994, the joint venture completed drilling the La Pista
x-1 well, located about 1 1/2 miles southwest of the Piedras Blancas field.
This well reached a depth of 8,775 feet with the Petrolifera and Tordillo
formations as primary targets. Structurally, the formations were encountered
as expected but failed to exhibit good productive characteristics. Extended
testing produced hydrocarbons, but not in commercial quantities.
Early this year, the joint venture completed a $1.6 million 3D
seismic program which covers a 90 square kilometer rectangular area including
the area of Petrolifera formation gas development potential described on pages
6 and 7, under "Gas Development", the Entre Lomas oil field, and an extensive
area on either side of the fault which runs through the crest of the Entre
Lomas structure. The main objective of this seismic was to better select
drilling locations for Petrolifera gas development, identify future development
drilling locations in the Entre Lomas oil field, and find exploration potential
in Los Alamos and Lomas de Ocampo. These two areas were lightly explored early
on in the life of the Entre Lomas concession and have produced, from a few
wells, small amounts of oil from the Tordillo and Quintuco formations.
-13-
15
Late during the year, while drilling an Entre Lomas oil field
Quintuco formation development well, the joint venture drilled down to and
perforated a lower section of the Tordillo formation which was previously
untested. This formation has produced most of the oil in the Charco
Bayo/Piedras Blancas field complex described on page 5. The well was placed on
production from the Tordillo. Results have been sufficiently positive to
generate interest in potential Tordillo development in the area around this
well and to the northwest where the Lomas de Ocampo area has accumulated
Tordillo production. The joint venture plans to reenter previously drilled
wells which provide access to the Tordillo and will soon drill a well to the
northwest in the direction of Lomas de Ocampo targeting this formation.
The joint venture partners are currently drilling an exploration
well on the Borde Mocho prospect. This well, a Tordillo formation test, with
a projected total depth of 9,750 feet, is located approximately four and
one-half miles to the southwest of the Piedras Blancas field, just inside the
concession's boundary with the Bajada del Palo field. YPF previously drilled
several wells on the opposite side of the concession boundary, which produced
small accumulations of oil from the Tordillo formation before being abandoned.
ACAMBUCO
The Company owns a 1.5% participation interest in the Acambuco
joint venture, an oil and gas exploration and development concession located in
Northwest Argentina, in the province of Salta, on the border with Bolivia. The
Acambuco concession covers an area of 267,000 acres.
The Company has been a participant in the Acambuco area since
1981. Three wells were drilled unsuccessfully in the early 1980's to depths
ranging from 16,000 to 18,000 feet. Although two wells gave indications of oil
and gas productive potential, they had to be abandoned for mechanical reasons.
In the mid 1980's, a small shallow oil field was discovered and
partially developed in the San Telmo formation. The field known as Mac-Sur has
produced little oil.
Although all activity in this area has to date been unsuccessful,
the concession has been lightly explored. Significant gas production and
reserves exist to the south and east of the concession in the Ramos and
Aguarague concessions. In October 1994, the Acambuco partners, consisting of
Bridas S.A.P.I.C., Northwest Argentina Corporation and the Company, entered
into a farmout agreement with YPF, whereby YPF received a 45% interest in the
concession in exchange for drilling, within five years, four exploration wells
on four separate geological structures, the costs of which are to be paid 100%
by YPF. The agreement also provides that YPF will finance development drilling
which might result from successful exploration. Such financing is non-recourse
and to be repaid without penalty or interest out of production revenues from
the concession. The Company has the option, in each exploration prospect which
is drilled, to either proportionately reduce its 1.5% interest by 45%; pay its
share of the exploration costs; or exercise the non-consent penalty provisions
of its 1984 agreement with Bridas while retaining its 1.5% interest.
YPF and Bridas believe that the area has considerable gas
potential and could be a possible source of future gas exports to major
consumption centers in Brazil. However, it is an overthrust area, with very
complex geology wherein drilling is extremely difficult and costly. The
objective formations are deep with well depths likely to reach 18,000 feet and
-14-
16
a high risk of mechanical problems, such as those encountered by Bridas,
Northwest Argentina and the Company in the early 1980's.
In March 1995, YPF commenced drilling the San Pedrito X-1 well
with an objective total depth of 15,800 feet. The well will test the Santa
Rosa/Huamampampa formation. For this initial exploration well, the Company
exercised its non-consent option. As of late February 1996, the depth of the
well had reached approximately 14,500 feet and was drilling in the Huamampampa
with gas shows at the surface. The cumulative costs of this well to date have
exceeded $30 million. The well has encountered problems of all types, including
severe formation pressures, side wall cave-ins, and stuck drill pipe which have
required special services and resulted in delays.
The location for the second exploration well, the San Antonio X-1,
has been selected. This well is to be drilled to a total depth of 14,600
feet. The objective is also the Santa Rosa/Huamampampa formation. Drilling at
this location will commence after the San Pedrito well is completed.
In addition, the Acambuco partners have approved an additional
project to test the same target, which project is not a part of the YPF farmout
agreement. Sometime in 1996, Bridas, as operator, will reenter the Macueta
1002 well and drill horizontally to a higher more favorable position in the
Macueta structure where fractures are believed to exist in the Huamampampa
formation. This well is one of the three original wells drilled in the early
1980's. Recent seismic interpretation has revealed that the well was drilled
on the flank of the Macueta structure.
ECONOMIC AND POLITICAL ENVIRONMENT
Since 1989, the government of President Menem has pursued free
market policies, including the privatization of state-owned companies,
deregulation of the oil and gas industry, which included the successful sale of
YPF shares in public markets, tax reform to equalize income tax rates for
domestic and foreign investors, liberalization of import and export laws, and
the lifting of exchange controls.
The cornerstone of the country's economic reforms since 1989 has
been its change in monetary policy. By early 1991, the exchange rate between
the austral and the U.S. dollar reached 10,000 to 1. In April of that year,
the convertibility law was implemented and the austral was renamed the peso.
One peso became the equivalent of 10,000 former australs, establishing an
exchange rate of one Argentine peso to one U.S. dollar. The convertibility
plan requires that the country's monetary base be backed by an equivalent
amount of international reserves, including U.S. dollars and gold. The
government is forbidden to print pesos unless it is accompanied by an
equivalent increase in international reserves. Likewise if money leaves
Argentina, the government guarantees the exchange rate of 1:1 and will withdraw
an equivalent amount of pesos from circulation. The Argentine government has
not strayed from this policy since, and even though it is generally accepted
that the peso is overvalued, the U.S. dollar exchange rate has remained at 1:1.
These policies have been successful as evidenced, first, by a
reduction in annual inflation from the 1989 rate of 5,000 percent to less than
5 percent in 1995 and, second, an influx of foreign investment capital into the
country.
-15-
17
Events in Mexico which have resulted in devaluations of its
currency since December 1994, produced a crisis of confidence in Latin America
during 1995. Foreign investors trapped by the devaluation in Mexico, began to
withdraw funds from all Latin American countries including Argentina where the
banking system was severely impacted. The Argentine government maintained its
committment to the convertibility law and announced certain economic measures,
including reductions in government expenditures and increases in taxes
including raising the value added tax from 18% to 21%. Implementation of these
policies resulted in significant loans from the International Monetary Fund,
the World Bank and the Interamerican Development Bank which assisted Argentina
through the crisis.
Elections were held in Argentina in May of 1995 and Carlos Menem
was reelected to a second term. He has indicated his intention to continue the
free market policies and monetary reforms which have worked so well and enabled
Argentina to survive relatively unscathed the recent crisis of confidence in
Latin America that resulted from what has come to be known as the "tequila
effect".
ITEM 2. PROPERTIES
See ITEM 1(c) for a description of properties.
ITEM 3. LEGAL PROCEEDINGS
Other than as described in the financial statements, there are no
material pending legal proceedings to which the Company is a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-16-
18
P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
At December 31, 1995, there were 1,526 record holders of the
Company's ordinary shares, $0.01 par value. The ordinary shares are traded
sporadically in the over-the-counter market. The Company understands that the
trades which occur are made both at the quoted market price or on a negotiated
basis outside of the quoted market. The high and low bid prices listed below
were provided to the Company by the National Association of Securities Dealers
Automated Quotation System (NASDAQ).
For reasons described on page 19, under "Management's Discussion
and Analysis of Financial Condition and Results of Operation", effective the
third quarter of 1995, the Company reduced its quarterly dividend to 16.25
cents per share from the previous level of 32.5 cents. Future dividends are
necessarily dependent upon numerous factors, including, among others, earnings,
capital spending, changes in governmental regulations and changes in crude oil
and natural gas prices. The Company reserves the right to change the level of
dividend payments or to discontinue or suspend such payments at the discretion
of the Directors.
Stock Price
------------------------
High Low Dividend
-------- -------- ---------
Quarter of 1994
First $ 20 $ 18 $ .32 1/2
Second 18 1/2 14 3/4 .32 1/2
Third 17 3/4 16 1/2 .32 1/2
Fourth 17 15 .32 1/2
Quarter of 1995
First $ 15 1/4 $ 14 $ .32 1/2
Second 15 3/4 15 1/4 .32 1/2
Third 16 1/4 15 .16 1/4
Fourth 16 3/4 14 3/4 .16 1/4
The Company has been advised that: a Cayman Islands company may
not pay dividends to shareholders out of its share capital or share premium
account; there are no Cayman Islands laws, decrees or regulations relating to
restrictions on the import or export of capital or exchange controls affecting
remittances of dividends, interest and other payments to non-resident holders
of the Company's ordinary shares; there are no limitations either under the
laws of the Cayman Islands or under the Company's Memorandum or Articles of
Association restricting the right of foreigners to hold or vote the Company's
ordinary shares; there are no existing laws or regulations of the Cayman
Islands imposing taxes or containing withholding provisions to which United
States holders of the Company's ordinary shares are subject; and there are no
reciprocal tax treaties between the Cayman Islands and the United States.
-17-
19
ITEM 6. SELECTED FINANCIAL DATA
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(Dollars in thousands
except per share amounts)
Revenues $36,942 $33,267 $31,524 $36,281 $35,364
Net Income 8,268 8,168 9,305 11,281 11,046
Income per
Ordinary Share 1.12 1.11 1.26 1.53 1.50
Dividends Declared per
Ordinary Share .975 1.30 1.30 1.29 1.50
Total Assets at
December 31 46,498 44,342 46,378 46,597 45,667
Stockholders' Equity at
December 31 35,702 34,610 36,010 36,273 34,486
-18-
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
The Company has continued its efforts to maximize cash flow from
the Entre Lomas joint venture. In 1995, the Company received $7.2 million in
distribution and dividends compared with $12.8 million and $9.8 million
received in 1994 and 1993, respectively.
The reduction in distributions from Entre Lomas is the result of
an increase in the level of capital expenditures in the area. During 1995, the
Entre Lomas partners reached an understanding about the need to increase
investment levels in the concession over the next few years with the view to
achieving various objectives. The most important being: full development of
the existing producing fields; expansion of secondary recovery throughout the
Charco Bayo/Piedras Blancas field complex substantially increasing water
injection volumes from current levels; pursue, to the extent permitted by
markets and pipeline capacity, efforts to fully develop Petrolifera gas
production in the new Entre Lomas gas field; expand production facilities as
required by increases in fluid production and water injection; and continue
current exploration efforts, ultimately drilling the most attractive
exploration prospects. The understanding referred to above, is not an
expenditure commitment by the partners, but a general agreement about the long
term development of the concession. Actual future investments will be defined
through the annual budgeting process.
Effective August 1, 1995, the Company and its Entre Lomas
partners approved a capital spending program for the 1995/1996 fiscal year of
$33 million ($16 million, net to the Company), which amount represented an
increase in expenditures of approximately fifty percent over the last several
years. This heightened level of investment was consistent with the previously
described understanding reached by the partners. Maintaining investments at
this level over time is contingent on success of these programs and continued
stability of oil and gas prices.
Raising capital spending by this magnitude should have a
favorable long term effect on Entre Lomas production rates and, consequently,
the Company's level of income and cash flow. In order to assure the Company
can commit the financial resources required to carry out the 1995/1996
investment budget and future possible investments at this heightened level,
effective the third quarter of 1995, the Company reduced its quarterly dividend
to 16.25 cents per share from the previous level of 32.5 cents. Future
dividends are necessarily dependent upon numerous factors, including among
others, earnings, capital spending, changes in governmental regulations and
changes in crude oil and natural gas prices. The Company reserves the right to
change the level of dividend payments or to discontinue or suspend such
payments at the discretion of the Directors.
-19-
21
RESULTS OF OPERATIONS
REFER TO CONSOLIDATED STATEMENT OF OPERATIONS ON PAGE 22.
1995 VS 1994
Operating revenues increased by $3.2 million compared with 1994.
The primary causes of this increase were higher oil sales prices, which in
1995, on a per barrel basis, averaged $16.67 versus $15.11 during 1994;
increased gas sales volumes, resulting from the success of gas development
efforts in the new Entre Lomas gas field, described on pages 6 and 7, under
"Gas Development"; and higher contract gas prices in effect during 1995.
Other revenues increased by $442 thousand as a result of
significantly higher interest rate yields during 1995 on the Company's short
term financial investments.
Operating expense increased by $1.2 million compared with the
prior year due to several factors, the two most important of which are greater
number of well workovers in both producing and injection wells, and costs
associated with a polymer injection pilot implemented in the early part of the
year.
Depreciation, depletion and amortization increased by
approximately $933 thousand due to a combination of greater capital
expenditures resulting in increases in the Company's depreciable property and
equipment base, and adjustments to estimates of the Company's oil and gas
reserves as compared with the prior year.
Exploration expense increased by $917 thousand compared with the
prior year due to costs of the 3D seismic program conducted during the early
part of the year and the charge associated with the write off of the La Pista
x-1 well.
Argentine taxes increased by $914 thousand over the prior year
due to additional production and sales taxes directly associated with higher
operating revenues and greater income taxes associated with higher Argentine
taxable income.
In 1994, as a result of new environmental regulations in
Argentina, the joint venture began to accrue costs for future plugging and
abandonment of wells in all of its producing fields. This accrual was
initiated with a retroactive charge in 1994 and is the principal cause of the
$886 thousand reduction in other expense.
1994 VS 1993
Operating revenues for 1994 were $2.1 million higher than in
1993. Gas sales from Entre Lomas increased due to the success of gas
development activities in the concession which resulted in a significantly
higher volume of natural gas sold. Also contributing to the increase was the
termination of the joint venture's obligation to deliver gas to YPF under terms
of the original Entre Lomas contract. The joint venturers were successful in
quickly finding a market for their natural gas, as described on page 3, under
"Sale of Gas", at a price substantially higher than formerly received from YPF.
The effect of improved gas sales was partially offset by a decrease in oil
sales due to lower oil prices.
-20-
22
Other revenues decreased by $362 thousand compared with 1993. As
a result of the settlement reached between YPF and the Entre Lomas joint
venture, described on page 2, under "Deregulation", YPF repaid the outstanding
balance of the interest bearing gas capital account which existed under terms
of the original contract. The settlement went into effect March 1, 1994, and
had the effect of reducing interest income when compared with 1993.
Operating expense increased by $3 million compared with 1993.
The increase can be attributed primarily to two factors. The Entre Lomas joint
venture commenced paying oil transportation costs as required by the previously
described YPF settlement and an increase in the number of well workovers
performed in the concession.
Depreciation, depletion and amortization increased by $1.5
million compared with 1993. The increase was the result of amortization
expense relating to the cost associated with obtaining, as part of the
settlement with YPF, the right to sell gas in the open market.
Exploration expense decreased by $1 million because of the
substantial seismic program which occurred in 1993. Expenditures incurred
during the current year related to interpretation of results.
Argentine taxes decreased in 1994 due to the combined effect of
the variations described in the preceding paragraphs.
-21-
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Public Accountants 23
Consolidated Balance Sheets
December 31, 1995 and 1994 24
Consolidated Statements of Operations
Three Years Ended December 31, 1995 25
Consolidated Statements of Stockholders' Equity
Three Years Ended December 31, 1995 26
Consolidated Statements of Cash Flows
Three Years Ended December 31, 1995 27
Notes to Consolidated Financial Statements 28
Schedules--All schedules have been omitted, as the required information has
been included in the consolidated financial statements and notes thereto, or
because the schedules are not applicable or required.
-22-
24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Apco Argentina Inc.:
We have audited the accompanying consolidated balance sheets of
Apco Argentina Inc. (a Cayman Islands corporation) and subsidiary as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Apco
Argentina Inc. and subsidiary as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 12, 1996
-23-
25
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands) December 31,
--------------------------
1995 1994
------- ------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 4) $17,244 $19,169
Accounts receivable 5,699 6,039
Inventory 2,480 2,345
Other current assets 217 256
------- ------
Total current assets 25,640 27,809
PROPERTY AND EQUIPMENT
less accumulated depreciation of $23,601 and $18,351
in 1995 and 1994, respectively (Notes 1 and 3) 20,805 16,496
Other assets 53 37
------- ------
$46,498 $44,342
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,922 $ 1,978
Accrued liabilities 3,306 2,518
Dividends payable 1,196 2,392
------- ------
Total current liabilities 8,424 6,888
------- ------
Other liabilities 2,372 2,844
Commitments and Contingencies (Notes 2 and 8 ) - -
STOCKHOLDERS' EQUITY:
Ordinary shares, par value $.01 per share;
15,000,000 shares authorized;
7,360,195 shares outstanding 74 74
Additional paid-in capital 9,326 9,326
Retained earnings 26,302 25,210
------- ------
Total stockholders' equity 35,702 34,610
------- ------
$46,498 $44,342
======= =======
The accompanying notes are an integral part of these consolidated statements.
-24-
26
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands) For the Years Ended December 31,
---------------------------------------------
1995 1994 1993
------- ------- -------
REVENUES:
Operating revenues $35,742 $32,509 $30,404
Other revenues 1,200 758 1,120
------- ------- -------
36,942 33,267 31,524
------- ------- -------
COST AND EXPENSES:
Operating expense 12,355 11,166 8,154
Provincial royalties 3,759 3,260 3,053
Selling and administrative 2,371 2,362 2,274
Depreciation, depletion and amortization 4,625 3,692 2,144
Exploration expense 1,457 540 1,599
Argentine taxes 4,046 3,132 4,669
Other expense 61 947 326
------- ------- -------
28,674 25,099 22,219
------- ------- -------
NET INCOME $ 8,268 $ 8,168 $ 9,305
======= ======= =======
INCOME PER ORDINARY SHARE $ 1.12 $ 1.11 $ 1.26
======= ======= =======
AVERAGE ORDINARY SHARES AND
EQUIVALENTS OUTSTANDING (000's) 7,360 7,360 7,360
======= ======= =======
The accompanying notes are an integral part of these consolidated statements.
-25-
27
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars and Shares in Thousands)
Ordinary Shares Additional
--------------------- Paid-in Retained
Shares Amount Capital Earnings
------ ------ ---------- --------
BALANCE, January 1, 1993 7,360 $ 74 $ 9,326 $ 26,873
Net income - - - 9,305
Dividends declared
($1.30 per share) - - - (9,568)
----- ---- ------- --------
BALANCE, December 31, 1993 7,360 74 9,326 26,610
Net income - - - 8,168
Dividends declared
($1.30 per share) - - - (9,568)
----- ---- ------- --------
BALANCE, December 31, 1994 7,360 74 9,326 25,210
Net income - - - 8,268
Dividends declared
($0.975 per share) - - - (7,176)
----- ---- ------- --------
BALANCE, December 31, 1995 7,360 $ 74 $ 9,326 $ 26,302
===== ==== ======= ========
The accompanying notes are an integral part of these consolidated statements.
-26-
28
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
--------------------------------------------
1995 1994 1993
------- ------- -------
(Dollars in Thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 8,268 $ 8,168 $ 9,305
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 4,625 3,692 2,144
Abandonment of well drilled in prior year 502 - -
Reclassification of plugging and abandonment
provision from other liabilities to accumulated
depreciation 626 - -
Decrease (increase) in accounts receivable 340 3,275 (3,596)
(Increase) decrease in inventory (135) (79) 413
Decrease (increase) in other current assets 39 (80) 22
Increase (decrease) in accounts payable 1,944 (176) (216)
Increase (decrease) in accrued liabilities 788 (1,163) 143
Other, including changes in non-current
assets and liabilities (488) 700 4,616
------- ------- -------
Net cash provided by operating activities 16,509 14,337 12,831
------- ------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (10,062) (5,364) (6,279)
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid (8,372) (9,568) (9,384)
------- ------- -------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (1,925) (595) (2,832)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 19,169 19,764 22,596
------- ------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $17,244 $19,169 $19,764
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $2,785 $3,522 $4,880
The accompanying notes are an integral part of these consolidated statements.
-27-
29
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
GENERAL AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of Apco Argentina Inc. (a Cayman Islands corporation) and its
wholly owned subsidiary, Apco Properties Ltd. (a Cayman Islands
corporation), which are herein collectively referred to as the
Company. The Company is engaged in joint ventures in oil and gas
exploration, development and production in Argentina. Its
principal business is a 47.6 percent participation in the Entre
Lomas Concession, which is accounted for following the
proportional consolidation method.
Oil and gas operations are risky in nature. A successful
operation requires that a Company deal with uncertainties about
the subsurface that even a combination of experience, scientific
information and careful evaluation cannot always overcome.
Because the Company's assets are located in Argentina,
management, for many years, as described in Note 9, was required
to deal with threats from inflation, devaluation and currency
controls. Since 1991, the economic and political environment in
the country has improved dramatically due to free market economic
policies implemented by the government of President Carlos Menem.
These policies have resulted in significantly reducing inflation
and stabilization of the Argentine peso. In May of 1995,
President Menem was reelected for a second four year term.
The Williams Companies, Inc. ("Williams") owns 67.14
percent of the outstanding ordinary shares of the Company.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities, if any, at the date of the financial statements, and
the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
PROPERTY AND EQUIPMENT
Property is recorded at cost. Oil and gas properties are
depreciated over their productive lives using the units of
production method. All other property is depreciated on a
straight-line basis, using estimated useful lives of 3 to 15
years.
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30
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long- Lived Assets and for
Long-Lived Assets to Be Disposed Of was issued in March 1995.
The Company must adopt this statement in 1996. Management does
not expect the implementation of this statement to have a
material effect on the Company's financial position and results
of operations.
NET INCOME PER ORDINARY SHARE
Net income per ordinary share is based on the weighted
average number of ordinary shares outstanding.
FOREIGN EXCHANGE
The general policy followed in the translation of the
Company's financial statements of foreign operations into United
States dollars is in accordance with Statement of Financial
Accounting Standards No. 52, using the United States dollar as
the functional currency.
INCOME TAXES
Provision is made for deferred income taxes applicable to
temporary differences between the financial statements and tax
basis of the assets and liabilities, if any.
(2) ACAMBUCO JOINT VENTURE
The Company is a participant in the Acambuco joint venture
and has a 1.5 percent interest in an oil and gas concession in
the Acambuco area, located in northwest Argentina. Bridas
S.A.P.I.C. ("Bridas") is the operator of the joint venture.
As part of the settlement of a 1983 dispute between Bridas,
Northwest Argentina Corporation, a Williams subsidiary, and the
Company, in 1984, Williams agreed to guarantee the payment of
principal, interest and other costs related to a $7.9 million
loan obtained from a U.S. bank by Bridas S.A., an affiliate of
Bridas. Pursuant to the terms of the third amendment to the loan
agreement and the loan guarantee agreement, payments on the loan
began May 15, 1992. To date all principal and interest payments
have been made on schedule and the current loan balance is $3.4
million. Any U.S. dollar shortfall which may result from loan
payments made in Argentine currency by Bridas shall be borne
equally by Bridas and Williams.
-29-
31
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Because Williams' guarantee directly benefits the Company
and Northwest Argentina Corporation, the Company and Northwest
Argentina Corporation have each agreed to pay Williams one-half
of any amounts paid by it as a result of a Bridas default.
(3) ENTRE LOMAS JOINT VENTURE
The Company owns a 23 percent direct interest in the Entre
Lomas joint venture. It also owns a 24.6 percent indirect
interest by virtue of its 33.68 percent stock ownership in
Petrolera Perez Companc S.A., the operator of the joint venture,
which owns 73.15 percent of the joint venture. Consequently, the
Company's combined direct and indirect interests in the Entre
Lomas joint venture total 47.6 percent. The joint venture is
engaged in the exploration, development and production of oil and
gas in the Entre Lomas concession located in the provinces of Rio
Negro and Neuquen in southern Argentina.
As described in Note 1, the Company's pro-rata share of the
assets, liabilities, revenues and expenses of the Entre Lomas
joint venture and Petrolera Perez Companc are reflected in the
Company's Consolidated Financial Statements using proportional
consolidation.
The Entre Lomas joint venture uses the successful-efforts
method of accounting for oil and gas exploration and production
operation, whereby costs of acquiring non-producing acreage,
costs of drilling successful exploration wells and development
costs are capitalized. Costs of unsuccessful drilling are
expensed as incurred. The Entre Lomas concession is evaluated
periodically and, if conditions warrant, an impairment reserve
would be provided.
Statement of Financial Accounting Standards No. 69,
"Disclosures About Oil and Gas Producing Activities", requires
certain disclosures about oil and gas producing activities.
Unaudited information regarding the Company's interest in the
Entre Lomas joint venture is presented on pages 5 through 13.
-30-
32
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(4) CASH EQUIVALENTS
Cash equivalents are defined by the Company as short-term
investments with original maturities of three months or less.
Amounts are stated in thousands of dollars.
Principal
---------------------------
1995 1994
------- -------
Short-term investments:
Eurodollar term deposits with interest
ranging from 5 3/16 - 5 1/2% in 1995
and 5 - 5 11/16% in 1994, maturing
in January 1996 and January and
February 1995, respectively $11,972 $15,883
Argentine time deposits 4,701 2,838
------- -------
$16,673 $18,721
======= =======
The carrying amount reported in the balance sheet for
short-term investments is equivalent to fair value.
(5) MAJOR CUSTOMERS
Sales to customers with greater than ten percent of total
sales consist of the following:
For the Years Ended December 31,
---------------------------------------
1995 1994 1993
---- ---- ----
San Lorenzo S.A. 35.4% 22.3% 26.9%
EG3 S.A. 26.2% 14.2% *
Litoral S.A. 16.7% 13.7% *
Interpetrol International S.A. * 28.2% 31.4%
Isaura S.A. * 10.6% 14.2%
* Less than 10 percent
-31-
33
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(6) RELATED PARTY TRANSACTIONS
The Company paid approximately $206,000, $204,000, and
$201,000 in 1995, 1994 and 1993, respectively, to Williams and
affiliates for management services, general and administrative
expenses and purchases of materials and supplies. Accounts
payable to Williams and affiliates outstanding at December 31,
1995 and December 31, 1994, of approximately $22,000 and $25,000,
were paid in 1996 and 1995 respectively.
(7) CAYMAN ISLANDS AND UNITED STATES INCOME TAXES
In 1979, the Company changed the jurisdiction of its
incorporation from Delaware to the Cayman Islands. The Company's
income since that date, to the extent that it is derived from
sources outside the U.S., generally is not subject to U.S.
Federal income taxes. Also, the Company has been granted an
undertaking from the Cayman Islands government, expiring in 1999,
to the effect that the Company will be exempt from tax
liabilities resulting from tax laws enacted by the Cayman Islands
government subsequent to 1979. The Cayman Islands currently has
no applicable income tax or corporation tax and, consequently,
the Company believes its earnings are not subject to U.S. income
taxes or Cayman Islands income or corporation taxes.
(8) ARGENTINE TAXES
The Company recorded Argentine taxes as presented in the
following table. Amounts are stated in thousands of dollars.
1995 1994 1993
------ ------ ------
Income taxes $3,460 $2,704 $4,430
Other taxes 586 428 239
------ ------ ------
$4,046 $3,132 $4,669
====== ====== ======
In 1988, the Argentine government amended the obligatory
Savings Law requiring that all taxpayers deposit with the
government, both in 1988 and 1989, amounts computed on the basis
of prior year taxable incomes. The deposits were to be repaid
after five years and earned interest at the rate stipulated by
the law. It was the point of view of the joint venture and the
advice of its legal counsel that it was exempted from these
deposits due to the tax exemption granted in the original Entre
Lomas contract number 12,507. As a result the deposits were not
made.
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34
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
In August 1993, the Direccion General Impositiva ("DGI"),
the Argentine taxing authority, made a claim against Petrolera
for the delinquent deposits pertaining to the Entre Lomas
operation, which including interest and indexation for inflation,
amounts to $9.2 million. An appeal was filed by Petrolera in
Argentine Federal Tax Court. In the opinion of Petrolera's
management and legal counsel, the possibility that this claim
will result in an unfavorable outcome for the joint venture is
remote. The issue remains unresolved. The Company has no reason
to believe otherwise, and accordingly, has not recorded a
liability for its share of the asserted claim.
(9) ARGENTINE CURRENCY FLUCTUATIONS
Argentina has over the years experienced cycles of acute
inflation followed by extreme devaluation. However, inflation
and devaluation have diminished since 1991 due to implementation
of the convertibility law, privatization of public sector
Companies, deregulation and modifications in fiscal and monetary
policy.
By early 1991, the exchange rate between the austral and
the U.S. dollar reached 10,000 to 1. In April of that year, the
convertibility law was implemented and the austral was renamed
the peso. One peso became the equivalent of 10,000 former
australs, establishing an exchange rate of one Argentine peso to
one U.S. dollar. The convertibility plan requires that the
country's monetary base be backed by an equivalent amount of
international reserves, including U.S. dollars and gold. The
government is forbidden to print pesos unless it is accompanied
by an equivalent increase in international reserves. Likewise if
money leaves Argentina, the government guarantees the exchange
rate of 1 to 1 and will withdraw an equivalent amount of pesos
from circulation. No exchange gains or losses have been realized
by the Company during the three years ended December 31, 1995 as
the rate of exchange remains 1 to 1.
-33-
35
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(10) QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(Dollars in Thousands except
per share amounts)
1995
Revenues $8,733 $9,443 $9,884 $8,882
Costs and expenses 6,659 7,727 7,563 6,725
Net income 2,074 1,716 2,321 2,157
Net income per ordinary share .28 .23 .32 .29
1994
Revenues $6,681 $7,770 $10,416 $8,400
Costs and expenses 4,572 5,848 8,196 6,483
Net income 2,109 1,922 2,220 1,917
Net income per ordinary share .29 .26 .30 .26
-34-
36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(A) IDENTIFICATION OF DIRECTORS
Director's
Term of
Director Office
Name Age Position Since Expires
---- --- -------- -------- ----------
K. E. Bailey 53 Chairman of the Board and 1987 1998
Chief Executive Officer
J. H. Williams 77 Director 1992 1996
J. C. Bumgarner 53 Director 1994 1997
(B) IDENTIFICATION OF EXECUTIVE OFFICERS
Executive officers of the Company are elected by the Board
of Directors and hold office until relieved of such office by
action of the Board of Directors.
Officer
Name Age Position Since
---- --- -------- -------
K. E. Bailey 53 Chairman of the Board and 1987
Chief Executive Officer
J. D. McCarthy 53 Vice President and 1991
Chief Financial Officer
Thomas Bueno 44 Controller and Chief 1991
Accounting Officer
In March 1996, J. C. Bumgarner was appointed Chairman of
the Board and Chief Executive Officer to replace Keith E. Bailey,
who will remain on the Board of Directors. The appointment takes
effect April 1, 1996.
(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
None.
-35-
37
(D) FAMILY RELATIONSHIPS
There are no family relationships between any director or
executive officer and any other director or executive officer in
the Company.
(E) BUSINESS EXPERIENCE
Mr. Bailey is Chairman of the Board, Chief Executive
Officer and President of Williams. He has held various other
officer level positions with Williams and its subsidiaries since
1975.
Mr. Williams is engaged in personal investments. He was
Chairman of the Board and Chief Executive Office of Williams
prior to retiring in 1978. Mr. Williams is also a director of
General Cable Corporation and Unit Corporation.
Mr. Bumgarner is Senior Vice President Corporate
Development and Planning of Williams. He has held various
officer level positions with Williams since 1977.
J. D. McCarthy is Senior Vice President of Finance of
Williams. He was previously Vice President and Treasurer of
Williams from 1987 through 1991.
Thomas Bueno was Manager of Finance and Accounting of the
Company from 1985 through 1991.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None.
ITEM 11. EXECUTIVE COMPENSATION
(A) CASH COMPENSATION
The Company has not paid its present executive officers any
cash compensation or bonuses.
(B) COMPENSATION PURSUANT TO PLANS
None.
(C) OTHER COMPENSATION
None.
(D) COMPENSATION OF DIRECTORS
Directors who are employees of Williams receive no
additional compensation for service on the Board of Directors.
Directors who are not employees of Williams receive an annual
retainer of $8,000 and an additional fee for attending Board
meetings of $500 per meeting.
-36-
38
(E) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT
None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AT DECEMBER 31,
1995
Amount and
Nature of
Beneficial Percent
Name and Address of Ownership of
Title of Class Beneficial Owner (Note 1) Class
-------------- ------------------- ---------- -------
Ordinary Shares The Williams Companies, Inc. 4,941,822 67.14
$.01 Par Value One Williams Center
Tulsa, Oklahoma 74172
(B) SECURITY OWNERSHIP OF MANAGEMENT AT DECEMBER 31, 1995
Each of the directors of the Company beneficially owns ten
shares of the Company's ordinary shares, $.01 par value, as
director's qualifying shares.
(C) CHANGES IN CONTROL
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and related-party transactions are
disclosed elsewhere herein in Notes 1, 2 and 6 to the Notes to
Consolidated Financial Statements.
-37-
39
P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements filed in this report are set forth in
the Index to Consolidated Financial Statements under Item 8. All
schedules have been omitted as the required information has been
included in the consolidated financial statements and notes
thereto, or because the schedules are not applicable or required.
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
Exhibit
Number
-------
*(3) - Memorandum of Association of Apco Argentina Inc. as amended August 20, 1980, as filed with
Form 10-K of the Company for the fiscal year ended on December 31, 1980, Commission File
No. 0-8933 dated April 30, 1981.
*(3) - Articles of Association of Apco Argentina Inc. as filed with Form S-14 (Registration
No. 2-6354), dated March 16, 1979.
*(10) - Acambuco Area Operating Contract, which became effective April 23, 1981, as filed with
Form 10-K, No. 0-8933, dated April 14, 1982.
*(10) - Translation of agreement dated August 30, 1979, between Bridas, Socma, Inalruco and YPF for
the exploration, development and exploitation of hydrocarbons in the Acambuco area, as filed
with Form 10-K, No. 0-8933, dated April 12, 1984.
*(10) - Translation of Additional Clause Number 1, dated March 22, 1983 to the Agreement with YPF for
the exploration, development and exploitation of hydrocarbons in the Acambuco area,
officially approved by the executive branch of the Argentine government on November 11, 1983,
as filed with Form 10-K, No. 0-8933, filed April 12, 1984.
*(10) - Agreement dated April 23, 1981, among the Company and Bridas S.A.P.I.C., with respect to the
Acambuco project, Salta province, Argentina, as filed with Form 10-K, No. 0-8933, dated
April 14, 1982.
-38-
40
*(10) - Agreement between The Williams Companies, Inc., Northwest Argentina Corporation and Apco
Argentina Inc. dated April 15, 1987 relating to reimbursement of costs incurred by Williams
pursuant to the guarantee by Williams of the bank loan made to Bridas in
connection with the release by Bridas of Northwest Argentina Corporation's and Apco Argentina
Inc.'s liability in the Acambuco Joint Venture as filed with Form 10-K, No. 0-8933, dated
April 11, 1988.
*(10) - Agreement dated March 13, 1968, between Perez Companc and YPF for the Exploration,
Exploitation and Development of the "Entre Lomas" area, Contract Number 12,507 as filed with
Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Translation dated November 18, 1970, of agreement dated March 13, 1968, between Perez Companc
and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Joint Venture Agreement dated April 1, 1968, among Apco Oil Corporation, Perez Companc and
Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Joint Venture Agreement dated February 29, 1972, among the Company, Perez Companc and
Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Joint Venture Agreement dated March 23, 1977, among the Company, Perez Companc and Petrolera
as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Assignment dated February 10, 1977, between YPF and Gas del Estado as filed with Form S-1,
Registration No. 2-62187 dated September 26, 1978.
*(10) - Contract dated December 1977 amending the March 13, 1968 Agreement between Perez Companc and
YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Form of Separation Agreement dated September 22, 1978, between Apco and the Company as filed
with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Memorandum of Agreement dated August 16, 1979, among the Company, Perez Companc and Petrolera
as filed with Form 10-K, No. 0-8933, dated March 28, 1980.
*(10) - Agreement dated December 7, 1983, between Petrolera and YPF regarding the delivery of propane
and butane from the Entre Lomas area, as filed with Form 10-K, No. 0-8933, dated April 12,
1983.
-39-
41
*(10) - CONTRACT FOR THE EXPLORATION, EXPLOITATION AND DEVELOPMENT OF THE "ENTRE LOMAS" AREA, dated
July 8, 1982 between Yacimientos Petroliferos Fiscales Sociedad Del Estado and Petrolera
Perez Companc, Inc. relating to the extension of Contract No. 12,507, as filed with
Form 10-K, No. 0-8933, dated April 12, 1983.
*(10) - ADDITIONAL CLAUSE NUMBER 3 dated December 18, 1985, to the agreement between Perez Companc
and YPF covering the Entre Lomas area dated March 13, 1968 and attached translation as filed
with Form 10-K, No. 0-8933, dated April 11, 1988.
*(10) - Agreement between the Joint Committee created by the Ministry of Public Works and Services
and the Ministry of Energy, YPF and Petrolera Perez Companc S.A. dated December 26, 1990,
constituting the conversion to concession and deregulation of the original Entre Lomas
contract number 12,507.
(24) - Power of attorney.
(27) - Financial data schedule.
* Exhibits so marked have heretofore been filed with the
Securities and Exchange Commission as part of the
filing indicated and are incorporated herein by
reference.
-40-
42
SIGNATURE
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.
APCO ARGENTINA INC.
(Registrant)
Dated: March 14, 1996 By: /s/ Thomas Bueno
----------------------------
Thomas Bueno
Attorney-in-Fact
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
/s/ *Keith E. Bailey March 14, 1996
- -----------------------------------------
Keith E. Bailey Chairman of the Board
and Chief Executive Officer
/s/ *Jack D. McCarthy March 14, 1996
- -----------------------------------------
Jack D. McCarthy, Vice President and
Chief Financial Officer
/s/ *Thomas Bueno March 14, 1996
- -----------------------------------------
Thomas Bueno, Controller and Chief
Accounting Officer
/s/ *John H. Williams March 14, 1996
- -----------------------------------------
John H. Williams, Vice President and
Director
/s/ *John C. Bumgarner March 14, 1996
- -----------------------------------------
John C. Bumgarner, Director
*By: /s/ Thomas Bueno March 14, 1996
------------------------------------
Thomas Bueno, Attorney-in-Fact
-41-
43
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
*(3) - Memorandum of Association of Apco Argentina Inc. as amended August 20, 1980, as filed with
Form 10-K of the Company for the fiscal year ended on December 31, 1980, Commission File
No. 0-8933 dated April 30, 1981.
*(3) - Articles of Association of Apco Argentina Inc. as filed with Form S-14 (Registration
No. 2-6354), dated March 16, 1979.
*(10) - Acambuco Area Operating Contract, which became effective April 23, 1981, as filed with
Form 10-K, No. 0-8933, dated April 14, 1982.
*(10) - Translation of agreement dated August 30, 1979, between Bridas, Socma, Inalruco and YPF for
the exploration, development and exploitation of hydrocarbons in the Acambuco area, as filed
with Form 10-K, No. 0-8933, dated April 12, 1984.
*(10) - Translation of Additional Clause Number 1, dated March 22, 1983 to the Agreement with YPF for
the exploration, development and exploitation of hydrocarbons in the Acambuco area,
officially approved by the executive branch of the Argentine government on November 11, 1983,
as filed with Form 10-K, No. 0-8933, filed April 12, 1984.
*(10) - Agreement dated April 23, 1981, among the Company and Bridas S.A.P.I.C., with respect to the
Acambuco project, Salta province, Argentina, as filed with Form 10-K, No. 0-8933, dated
April 14, 1982.
*(10) - Agreement between The Williams Companies, Inc., Northwest Argentina Corporation and Apco
Argentina Inc. dated April 15, 1987 relating to reimbursement of costs incurred by Williams
pursuant to the guarantee by Williams of the bank loan made to Bridas in
connection with the release by Bridas of Northwest Argentina Corporation's and Apco Argentina
Inc.'s liability in the Acambuco Joint Venture as filed with Form 10-K, No. 0-8933, dated
April 11, 1988.
*(10) - Agreement dated March 13, 1968, between Perez Companc and YPF for the Exploration,
Exploitation and Development of the "Entre Lomas" area, Contract Number 12,507 as filed with
Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Translation dated November 18, 1970, of agreement dated March 13, 1968, between Perez Companc
and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Joint Venture Agreement dated April 1, 1968, among Apco Oil Corporation, Perez Companc and
Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Joint Venture Agreement dated February 29, 1972, among the Company, Perez Companc and
Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Joint Venture Agreement dated March 23, 1977, among the Company, Perez Companc and Petrolera
as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Assignment dated February 10, 1977, between YPF and Gas del Estado as filed with Form S-1,
Registration No. 2-62187 dated September 26, 1978.
*(10) - Contract dated December 1977 amending the March 13, 1968 Agreement between Perez Companc and
YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Form of Separation Agreement dated September 22, 1978, between Apco and the Company as filed
with Form S-1, Registration No. 2-62187 dated September 26, 1978.
*(10) - Memorandum of Agreement dated August 16, 1979, among the Company, Perez Companc and Petrolera
as filed with Form 10-K, No. 0-8933, dated March 28, 1980.
*(10) - Agreement dated December 7, 1983, between Petrolera and YPF regarding the delivery of propane
and butane from the Entre Lomas area, as filed with Form 10-K, No. 0-8933, dated April 12,
1983.
*(10) - CONTRACT FOR THE EXPLORATION, EXPLOITATION AND DEVELOPMENT OF THE "ENTRE LOMAS" AREA, dated
July 8, 1982 between Yacimientos Petroliferos Fiscales Sociedad Del Estado and Petrolera
Perez Companc, Inc. relating to the extension of Contract No. 12,507, as filed with
Form 10-K, No. 0-8933, dated April 12, 1983.
*(10) - ADDITIONAL CLAUSE NUMBER 3 dated December 18, 1985, to the agreement between Perez Companc
and YPF covering the Entre Lomas area dated March 13, 1968 and attached translation as filed
with Form 10-K, No. 0-8933, dated April 11, 1988.
*(10) - Agreement between the Joint Committee created by the Ministry of Public Works and Services
and the Ministry of Energy, YPF and Petrolera Perez Companc S.A. dated December 26, 1990,
constituting the conversion to concession and deregulation of the original Entre Lomas
contract number 12,507.
(24) - Power of attorney.
(27) - Financial data schedule.
* Exhibits so marked have heretofore been filed with the
Securities and Exchange Commission as part of the
filing indicated and are incorporated herein by
reference.