10-K405/A 1 d88484a1e10-k405a.txt AMENDMENT NO. 1 TO FORM 10-K PERIOD END 12/31/00 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (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, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission file number 0-8933 APCO ARGENTINA INC. (Exact name of registrant as specified in its charter) Cayman Islands (State or other jurisdiction of EIN 98-0199453 incorporation or organization) P. O. Box 2400 Tulsa, Oklahoma 74102 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (918) 573-2164 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 12, 2001, was $73,254,311. This value was calculated based upon the average bid and asked prices of the registrant's stock of $32.06 on March 12, 2001, 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 12, 2001 there were outstanding 7,360,311 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 2 Apco Argentina Inc. ("the Company") hereby amends its Annual Report on Form 10-K for the fiscal year ended December 31, 2000 to include the audited balance sheets of Petrolera Perez Companc S.A. ("Petrolera"), an Argentine corporation as of December 31, 2000 and 1999, and the related statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 2000, 1999, and 1998 as required by Rule 3-09 of Regulation S-X.T. The company owns a 33.684 percent stock interest in Petrolera, a partner in the Entre Lomas joint venture and the operator of the concession. PART IV: ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (c) Exhibits Required by Item 601 of Regulation S-K Exhibit Number (24) - Power of attorney 2 3 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of PETROLERA PEREZ COMPANC SOCIEDAD ANONIMA: We have audited the balance sheets of PETROLERA PEREZ COMPANC SOCIEDAD ANONIMA (an Argentine corporation) as of December 31, 2000 and 1999, and the related statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 2000, 1999 and 1998, all expressed in Argentine pesos as described in note 1.II to the financial statements. 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 in the United States of America. 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 statements 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 PETROLERA PEREZ COMPANC SOCIEDAD ANONIMA as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years ended December 31, 2000, 1999 and 1998, in conformity with generally accepted accounting principles in Argentina. Certain accounting practices used by the Company in preparing the accompanying financial statements conform with generally accepted accounting principles in Argentina, but do not conform with generally accepted accounting principles in the United States of America. A description of the significant differences between such principles and those accounting principles generally accepted in the United States of America and the approximate effect of those differences on net income and shareholders' equity are set forth in notes 11 and 12 to the accompanying financial statements. Buenos Aires, Argentina PISTRELLI, DIAZ Y ASOCIADOS January 30, 2001 C.P.C.E.C.F. Vol. 1 - Fo. 8 DANIEL G. MINENNA Partner C.P.A. Buenos Aires University C.P.C.E.C.F. Vol. 175 - Fo. 221 3 4 PETROLERA PEREZ COMPANC S.A. Maipu 1 - 18th floor - Buenos Aires FISCAL YEAR NO. 47 BEGINNING JANUARY 1, 2000 FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND 1999 Main business: Oil and gas exploration and production. Registration dates with the Public Register of Commerce: - Articles of Incorporation: April 14, 1954. - Last change to the Bylaws: December 1, 2000. Registration number with the "Inspeccion General de Justicia" (the Governmental Regulatory Agency of Corporations): 6,717. Expiration date of the Articles of Incorporation: September 2, 2052. CAPITAL STRUCTURE (Stated in pesos)
SUBSCRIBED, ISSUED, DESCRIPTION OF THE SHARES REGISTERED AND PAID IN ------------------------------------------------------------------------------------ --------------------------- Nominative, common and non-endorsable shares, 1 par value, 1 vote each 411,900 Nominative, preferred non-endorsable and nonvoting shares, 1 par value (1) 88,100 ------- 500,000 =======
(1) Preferred shares are entitled to this treatment over the rest of the shares only as to their redemption in the event of the Company's liquidation. 4 5 PETROLERA PEREZ COMPANC S.A. BALANCE SHEETS AS OF DECEMBER 31, 2000 AND 1999 (Stated in Argentine pesos -- Note 1.II)
2000 1999 -------------- -------------- CURRENT ASSETS Cash 863,604 981,054 Investments (Note 2.a) 10,524,536 5,448,973 Trade receivables (Note 2.b) 8,936,404 7,097,773 Other receivables (Nota 2.c) 1,116,692 920,603 Inventories (Note 2.d) 1,070,813 1,369,899 -------------- -------------- Total current assets 22,512,049 15,818,302 -------------- -------------- NONCURRENT ASSETS Other receivables (Note 2.c) 8,169,229 1,301,116 Fixed assets (Exhibit I) 80,400,229 74,313,888 -------------- -------------- Total noncurrent assets 88,569,458 75,615,004 -------------- -------------- Total assets 111,081,507 91,433,306 ============== ============== CURRENT LIABILITIES Trade payables (Note 2.e) 4,963,498 3,735,380 Payroll and social security taxes 505,361 404,067 Taxes payable (Note 2.f) 13,317,302 6,920,496 Other liabilities (Note 2.g) 722,059 2,233,616 -------------- -------------- Total current liabilities 19,508,220 13,293,559 -------------- -------------- NONCURRENT LIABILITIES Other liabilities 1,170,400 1,521,520 Reserves for contingencies (Note 2.h) 808,228 1,600,513 -------------- -------------- Total noncurrent liabilities 1,978,628 3,122,033 -------------- -------------- Total liabilities 21,486,848 16,415,592 SHAREHOLDERS' EQUITY (Per respective statements) 89,594,659 75,017,714 -------------- -------------- Total liabilities and shareholders' equity 111,081,507 91,433,306 ============== ==============
The accompanying notes 1 to 12 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 5 6 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Argentine pesos --Note 1.II)
2000 1999 1998 ----------- ----------- ----------- NET REVENUES 95,252,353 60,855,496 50,450,600 OPERATING COSTS (Note 2.i) (42,416,380) (30,520,756) (30,579,782) ----------- ----------- ----------- Gross income 52,835,973 30,334,740 19,870,818 ADMINISTRATIVE EXPENSES (Exhibit III) (4,250,331) (2,543,994) (3,216,410) SELLING EXPENSES (Exhibit III) (3,585,378) (3,111,166) (3,683,903) EXPLORATION EXPENSES (Exhibit III) (925,577) (470,435) (1,521,157) ----------- ----------- ----------- Exploitation profits 44,074,687 24,209,145 11,449,348 OTHER INCOME, net (Note 2.j) 1,562,600 57,218 131,731 FINANCIAL INCOME AND HOLDING GAINS, net 341,658 253,304 147,540 ----------- ----------- ----------- Income before income tax 45,978,945 24,519,667 11,728,619 INCOME TAX (Note 1.III.f) (15,550,000) (8,650,000) (4,180,000) ----------- ----------- ----------- Net income for the year 30,428,945 15,869,667 7,548,619 =========== =========== ===========
The accompanying notes 1 to 12 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 6 7 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Argentine pesos -- Note 1.II)
CAPITAL STOCK RETAINED EARNINGS --------------------------- ------------------------------------------- RESERVED EARNINGS --------------------------- -------------- PAR ADJUSTMENT LEGAL STATUTORY UNAPPROPRIATED VALUE TO CAPITAL RESERVE RESERVE EARNINGS TOTAL ----------- ----------- ----------- ----------- -------------- ------------ Balance as of December 31, 1997 500,000 82,041 100,000 1 67,643,481 68,325,523 Cash dividends approved by Regular Shareholders' Meetings -- -- -- -- (4,389,000) (4,389,000) Net income for the year -- -- -- -- 7,548,619 7,548,619 ----------- ----------- ----------- ----------- ----------- ----------- Balance as of December 31, 1998 500,000 82,041 100,000 1 70,803,100 71,485,142 Cash dividends approved by Regular Shareholders' Meetings -- -- -- -- (12,337,095) (12,337,095) Net income for the year -- -- -- -- 15,869,667 15,869,667 ----------- ----------- ----------- ----------- ----------- ----------- Balance as of December 31, 1999 500,000 82,041 100,000 1 74,335,672 75,017,714 Cash dividends approved by Regular Shareholders' Meetings -- -- -- -- (15,852,000) (15,852,000) Net income for the year -- -- -- -- 30,428,945 30,428,945 ----------- ----------- ----------- ----------- ----------- ----------- Balance as of December 31, 2000 500,000 82,041 100,000 1 88,912,617 89,594,659 =========== =========== =========== =========== =========== ===========
The accompanying notes 1 to 12 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 7 8 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF CASH FLOWS (a) FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Argentine pesos - Note 1.II)
2000 1999 1998 ----------- ----------- ----------- FUNDS PROVIDED BY (USED IN) OPERATIONS: NET INCOME FOR THE YEAR 30,428,945 15,869,667 7,548,619 ADJUSTMENTS TO RECONCILE NET INCOME FOR THE YEAR TO NET FUNDS PROVIDED BY: Fixed assets depreciation 8,379,233 7,859,390 8,162,842 Decrease in fixed assets 831,489 8,608 (65,689) Net decrease in reserves for contingencies (792,285) -- -- CHANGES IN ASSETS AND LIABILITIES: (Increase) decrease in trade receivables (1,838,631) (3,055,533) 160,207 (Increase) decrease in other receivables (7,064,202) 780,393 (669,528) Decrease (Increase) in inventories 299,086 (41,058) 2,474,778 Increase in trade payables 3,392,596 1,689,313 767,178 Increase (decrease) in payroll and social security taxes 101,294 (85,953) 11,282 Increase (decrease) in taxes payable 6,396,806 5,485,307 (2,523,051) (Decrease) increase in other liabilities (1,862,677) 95,527 432,813 ----------- ----------- ----------- NET FUNDS PROVIDED BY OPERATIONS 38,271,654 28,605,661 16,299,451 FUNDS USED IN INVESTING ACTIVITIES: Fixed assets acquisitions (17,461,541) (15,311,758) (16,939,325) FUNDS USED IN FINANCING ACTIVITIES: Dividends paid (15,852,000) (12,337,095) (4,389,000) ----------- ----------- ----------- Net increase (decrease) in funds 4,958,113 956,808 (5,028,874) Funds at beginning of year 6,430,027 5,473,219 10,502,093 ----------- ----------- ----------- Funds at end of year 11,388,140 6,430,027 5,473,219 =========== =========== ===========
(a) Cash on hand and in bank plus equivalent investments (original placements maturing in less than three months). The accompanying notes 1 to 12 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 8 9 PETROLERA PEREZ COMPANC S.A. NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000, 1999 AND 1998 (Figures stated in Argentine pesos -- Note 1.II) 1. SIGNIFICANT ACCOUNTING POLICIES I. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES APPLIED AND DISCLOSURE METHODS The Company's financial statements have been prepared in accordance with generally accepted accounting principles in Argentina ("Argentine GAAP"), which differ in certain respects from generally accepted accounting principles in the United States of America ("US GAAP"). A description of the significant differences between Argentine and US GAAP and the approximate effect of differences on Petrolera Perez Companc S.A's net income and shareholders' equity are set forth in notes 11 and 12, respectively. The preparation of financial statements in conformity with Argentine GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. While it is believed that such estimates are reasonable, actual results could differ from those estimates. The Company is operator and participant in the hydrocarbon exploitation concession in the Entre Lomas oil field located in Rio Negro and Neuquen provinces. The concession contract, renegotiated in January, 1991 and 1994, permits the concessionaires to freely dispose of their crude oil and natural gas production and extends the concession term through January 21, 2016, with the possibility for a further 10-year extension. The Company records in its balance sheet and statement of income its interest in the above mentioned concession by the proportional consolidation method, in accordance with Technical Resolution No. 14 of the Argentine Federation of Professional Councils in Economic Science (FACPCE), which consists in including its percentage share of assets, rights, obligations and results of operations of the concession. The partners' interests in the Entre Lomas concession as of December 31, 2000, 1999 and 1998 are as follows:
INTEREST % ---------- Petrolera Perez Companc S.A. (operator) 73.15 APCO Argentina Inc. Argentine Branch 23.00 Pecom Energia S.A. 3.85 ---------- 100.00 ==========
9 10 The Company's percentage interest (73.15%) in the assets and liabilities allocated to the concession, which are included in the balance sheets as of December 31, 2000 and 1999, is as follows:
2000 1999 ---------- ---------- Current assets 5,100,040 15,809,099 Noncurrent assets 88,569,405 75,614,951 ---------- ---------- Total assets 93,669,445 91,424,050 ========== ========== Current liabilities 10,369,730 7,529,521 Noncurrent liabilities 1,744,628 3,122,033 ---------- ---------- Total liabilities 12,114,358 10,651,554 ========== ==========
II. RESTATEMENT IN CONSTANT PESOS The financial statements comprehensively recognize the effects of changes in the purchasing power of the peso as of August 31, 1995, through the application of the restatement method in constant pesos as provided by Technical Resolution No. 6 of the FACPCE. As from September 1, 1995, pursuant to General Resolution No. 8/95 of the "Inspeccion General de Justicia" (the Governmental Regulatory Agency of Corporations), the Company discontinued the application of this method but maintained the restatements recorded up to such date. This method is accepted by generally accepted accounting principles in Argentina so long as variation in the price index applicable for restatement purposes does not exceed 8% per annum. The change in this index for each of the fiscal years ended as from September 1, 1995, was below the above mentioned percentage. III. VALUATION METHODS The main valuation methods used for the preparation of the financial statements have been as follows: a) CASH, RECEIVABLES AND LIABILITIES, OTHER THAN RESERVES: - In local currency: at face value. - In foreign currency: at face value in foreign currency converted at the exchange rates in effect at each year-end for the settlement of these transactions. Financial income (expense) accrued through each year-end, has been added to or deducted from receivables and payables, as applicable. b) INVESTMENTS: - Time deposits: at face value plus interest accrued through the end of the year. - Mutual funds: at mutual fund share price at year-end, net of the necessary expenditures for its sale. 10 11 c) INVENTORIES: - Hydrocarbons: at reproduction cost at the end of each year, which does not exceed the recoverable value. - Materials and spares: at replacement cost based on the last purchase, which does not exceed the recoverable value. d) FIXED ASSETS: At acquisition or construction cost less related accumulated depreciation, calculated in proportion to the months of estimated useful lives, except wells and production installations, which are depreciated based on the lifting of proved developed hydrocarbon reserves through the expire of the concession. The Company uses the successful effort method to account for the transactions in connection with oil and gas exploration and production. The carrying amount of fixed assets taken as a whole does not exceed its recoverable value. The detail of these assets is set forth in Exhibit I. e) RESERVES FOR CONTINGENCIES: These reserves have been set aside to cover possible loss contingencies, derived from differences in interpreting applicable legislation, that might give rise to potential claims by third parties and liabilities to the Company. When estimating the amounts, the Company took into account the probability of occurrence of the contingency concerned. f) INCOME TAX AND TAX ON MINIMUM PRESUMED INCOME: The Company determines the accounting charge for income tax, by applying the effective 35% tax rate (33% for the year ended December 31, 1998) to the taxable income of the year, without considering the effect of temporary differences between the book and taxable income. The tax on minimum presumed income is supplementary to income tax, since while the latter is levied on the year's taxable income, the tax on minimum presumed income is a minimum tax levied on the potential income of certain productive assets at the rate of 1%, so that the Company's fiscal liability will be equal to the higher of both taxes. However, should the tax on minimum presumed income exceed income tax in any given year, such excess may be applied to reduce any excess of income tax over the tax on minimum presumed income in any of the ten succeeding years. As of December 31, 2000, 1999 and 1998, the amount determined as income tax was higher than the tax on minimum presumed income. The amounts charged to income for the year in the "Income Tax" account as of December 31, 2000, 1999 and 1998 were 15,550,000, 8,650,000, and 4,180,000, respectively. g) SHAREHOLDERS' EQUITY ACCOUNTS: They have been restated in accordance with the method described in section II of this note, except the "Capital stock-Par value" and the "Reserved earnings" accounts which were left at their original amounts. The adjustment required to restate them through August 31, 1995, is disclosed in the "Capital stock - Adjustment to capital" and "Unappropriated earnings" accounts, respectively. 11 12 h) INCOME STATEMENT ACCOUNTS: - Charges for consumption of nonmonetary assets valued at cost, which basically affect operating costs, have been computed on the adjusted amounts of such assets, following the restatement method described in section II on this note. - The caption "Financial income and holding gains, net" account discloses the nominal financial income and holding gains generated in each year. - The accounts accruing monetary transactions were computed at nominal value. i) REVENUE RECOGNITION: - Revenues are recognized when products are shipped or services are rendered and the risk of loss has been transferred to the customer. 2. BREAKDOWN OF THE MAIN ACCOUNTS The main accounts in the Company's financial statements breakdown as follows:
2000 1999 ---------- ---------- a) INVESTMENTS: Time deposits 9,552,728 4,184,024 Mutual funds 971,808 1,264,949 ---------- ---------- 10,524,536 5,448,973 ========== ========== b) TRADE RECEIVABLES: Related company: Pecom Energia S.A. 206,189 335,476 Other customers 8,730,215 6,762,297 ---------- ---------- 8,936,404 7,097,773 ========== ========== c) OTHER RECEIVABLES: CURRENT: Prepaid expenses 217,969 74,789 Advances to personnel 106,311 83,555 Prepayments to vendors 93,091 197,505 Other 699,321 564,754 ---------- ---------- 1,116,692 920,603 ========== ========== NONCURRENT: Taxes to be recovered (Note 7) 1,201,854 1,201,854 Compulsory saving receivables (Note 8) 6,868,113 -- Other 99,262 99,262 ---------- ---------- 8,169,229 1,301,116 ========== ==========
12 13
2000 1999 ------------ ------------ d) INVENTORIES: Hydrocarbons 365,112 694,105 Materials and spares 705,701 675,794 ------------ ------------ 1,070,813 1,369,899 ============ ============ e) TRADE PAYABLES: Related companies: Pecom Energia S.A. 273,479 389,115 Oleoductos del Valle S.A. 236,501 217,295 Other vendors 4,453,518 3,128,970 ------------ ------------ 4,963,498 3,735,380 ============ ============ f) TAXES PAYABLE: Compulsory saving payables (Note 8) 3,350,444 -- Income tax accrual (net of withholding and prepayments) 8,881,379 5,266,785 Royalty accrual 855,855 740,588 VAT payable 110,909 416,210 Other 118,715 496,913 ------------ ------------ 13,317,302 6,920,496 ============ ============ g) OTHER LIABILITIES: CURRENT: Directors' and Statutory Auditor's fees 345,268 298,452 Retirement and pension fund (Note 6) 369,291 1,927,664 Other 7,500 7,500 ------------ ------------ 722,059 2,233,616 ============ ============
2000 1999 1998 ------------ ------------ ------------ h) RESERVES FOR CONTINGENCIES: At beginning of year 1,600,513 1,600,513 1,600,513 Net recovery of year (1) (792,285) -- -- ------------ ------------ ------------ At end of year 808,228 1,600,513 1,600,513 ============ ============ ============
(1) Credited to "Other income, net" of the income statement 13 14
2000 1999 1998 ----------- ----------- ----------- i) OPERATING COSTS: Beginning inventory 1,369,899 1,328,841 3,803,619 ----------- ----------- ----------- Purchases 6,577,253 3,122,293 6,403,579 Operating expenses (Exhibit III) 35,540,041 27,439,521 28,290,402 Capitalized consumptions -- -- (6,588,977) ----------- ----------- ----------- 42,117,294 30,561,814 28,105,004 ----------- ----------- ----------- Ending inventory (1,070,813) (1,369,899) (1,328,841) ----------- ----------- ----------- 42,416,380 30,520,756 30,579,782 =========== =========== =========== j) OTHER INCOME, NET: Net recovery of reserves for contingencies 792,285 -- -- Other 770,315 57,218 131,731 ----------- ----------- ----------- 1,562,600 57,218 131,731 =========== =========== ===========
3. TRANSACTIONS WITH RELATED COMPANIES Receivables and payables as of December 31, 2000 and 1999, are set forth in notes 2.b) and 2.e), respectively. The main transactions carried out during the respective years ended December 31, 2000, 1999 and 1998, include:
REVENUES FROM HYDROCARBONS SOLD ------------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ Related companies: Pecom Energia S.A. (1) 21,019,857 19,687,990 15,273,021 Transportadora de Gas del Sur S.A. -- -- 178,496 Pecom Agra S.A. -- -- 69,112 ------------ ------------ ------------ 21,019,857 19,687,990 15,520,629 ============ ============ ============
(1) Includes 15,023,545, 18,406,966 and 12,323,117, respectively, as of December 31, 2000, 1999 and 1998, corresponding to revenues from hydrocarbons sold to Refineria San Lorenzo S.A., merged with Pecom Energia S.A. during the current fiscal year.
PURCHASES AND OPERATING EXPENSES ------------------------------------------------ 2000 1999 1998 ------------ ------------ ------------ Related companies: Pecom Energia S.A. 2,162,572 2,584,449 2,395,370 Oleoductos del Valle S.A. 2,489,670 2,411,300 2,721,550 Petroleum Commercial Supply Inc. 8,412 101,225 124,249 PASA S.A. -- -- 44,256 ------------ ------------ ------------ 4,660,654 5,096,974 5,285,425 ============ ============ ============
14 15 4. MAIN CUSTOMERS Main customers with whom the Company did business during the respective years ended December 31, 2000, 1999 and 1998, are as follows: a) Oil (accounts for 84%, 73% and 66%, respectively, of total sales):
% SHARE --------------------------------------- CUSTOMER: 2000 1999 1998 --------- --------- --------- Petrobras Petroleo Brasileno S.A. 56 29 26 Pecom Energia S.A. 23 41 37 Shell C.A.P.S.A. 21 29 25 Tosco Refining Co. -- 1 12 --------- --------- --------- 100 100 100 ========= ========= =========
b) Natural gas (accounts for 13%, 24% and 31%, respectively, of total sales):
% SHARE ------------------------------------------------ CUSTOMER: 2000 1999 1998 ------------ ------------ ------------ Camuzzi Gas Pampeana S.A. 76 69 -- Pecom Energia S.A. 18 9 18 Litoral Gas S.A. -- 10 45 Metrogas S.A. -- 7 17 Other 6 5 20 ------------ ------------ ------------ 100 100 100 ============ ============ ============
c) Propane and butane (accounts for 3% of total sales):
% SHARE --------------------------------------- CUSTOMER: 2000 1999 1998 --------- --------- --------- Totalgaz Argentina S.A. 32 27 -- Enagas S.A. Distribuidora de Gas (Chile) 28 19 27 Abastecedora de Combustibles S.A. (Chile) 24 26 22 Careri J. C. y Careri P. 10 -- -- Sur Gas S.A. 2 6 19 Castex Gas S.A. -- 6 8 Dimarco S.A. -- 4 12 Other 4 12 12 --------- --------- --------- 100 100 100 ========= ========= =========
5. ROYALTIES The royalties are applied to the total production from the concession and are calculated applying 12% to the sales price, upon discounting certain expenses, in order to take the value of the cubic meter of crude oil, natural gas and LPG to the price thereof at the wellhead. 15 16 6. RETIREMENT AND PENSION FUND Under the agreement executed by Fundacion Perez Companc and Petrolera Perez Companc S.A., the resources of the retirement and pension fund will be provided by the Company through contributions with that specific aim and shall not be lower than 140,000 per annum. The retirement and pension fund will be exclusively managed by Fundacion Perez Companc, who will be unable to transfer such duty to third parties and, for legal purposes, it is the only party responsible for payment to the beneficiaries. Fund assets are mainly invested based on adequate security and profitability criteria under Retirement and Pension Law No. 24,241. All Company employees working as such of May 31, 1995, and with the required seniority are eligible for this benefit. It is calculated on the basis of the last computable salary and seniority of the workers included in the fund. The fund is supplementary; i.e. the benefit granted to the employee consists of the amount determined in accordance with the agreement, after deducting the benefits granted by the official pension system provided for in the second and third provisions of such agreement. 7. TAX CLAIMS FILED WITH THE NEUQUEN PROVINCIAL TAX BUREAU ("DPR") On February 3, 1993, the Company had been notified of Resolution No. 060/DPR/93, issued by the Neuquen Provincial Tax Bureau, which required the Company to pay stamp tax on Contract No. 12,507 - Additional Clause No. 3. The Company appealed this Resolution before the Neuquen Province Tax Court, on the grounds that, at the time the amount of stamp tax had been calculated, the period required by the statute of limitations had already expired. The Neuquen Province Tax Court disallowed the appeal on February 11, 1994, and on March 8, 1994, notified the Company of the final amount of stamp tax due at 1,642,999. The Company paid the amount claimed for the consortium's account on March 15, 1994 and duly notified YPF S.A. of this fact for the sole purpose of starting legal action, which was filed in April 1994 and was reinitiated on April 17, 1996 in an administrative procedure, since of Neuquen Province considered that such instance was not exhausted in spite of the clear and unquestionable content of the Tax Code. In September 1998, a second lawsuit has been filed at Neuquen Province Superior Court, after the failure of the administrative procedure filed with the Province Government. On April 4, 2000, the Supreme Court of the Province of Neuquen ruled disallowing the claim and ordering the Company to pay court expenses. Finally, on April 26, 2000, the Company filed extraordinary remedies with the Federal Tax Court against the ruling by the abovementioned Court, for which notice was served to the other party for it to answer it. The opinion of both the Company's management and legal counsel, is that the Federal Executive Power will have to reimburse the above mentioned amount under the terms of Article 12 of Contract No. 12,507, should the legal action mentioned above fail to prosper. 16 17 As of December 31, 2000, 1999 and 1998, the amount to be recovered of 1,201,854, equivalent to its 73.15 percent participation in the concession, is carried in the noncurrent receivables account (note 2.c). 8. COMPULSORY SAVING On August 5, 1993, the DGI (Argentine Tax Bureau) assessed the Company's capacity to pay compulsory savings ("Ahorro obligatorio") for the years 1988 and 1989 which totaled, as of such date, 9,248,956. On August 30, 1993, the Company filed an appeal with the Federal Tax Court against the abovementioned assessment. The Tax Court issued a ruling on April 18, 1997, confirming the resolution of the DGI. This decision was finally revoked by the Federal Contentious Administrative Court of Appeals on November 10, 1998. The Argentine Supreme Court revoked this ruling on May 4, 2000, and confirmed the ruling of the Federal Tax Court imposing Supreme Court and trial court expenses on the parties according to the costs incurred by each party. The court expenses originated at the Federal Tax were to be borne by the Company. The Court considered that the exemption granted on account of the agreement related to the exploitation of the Entre Lomas field does not release the Company from paying compulsory savings. Subsequently, the Company filed a petition for clarification stating that the non-promotional characteristic of the exemption was not analyzed, which was the Company's main grounds. On August 17, 2000, the Court disallowed the petition for clarification. Simultaneously, the DGI filed a tax foreclosure claiming the full amount of compulsory savings claimed by such agency. The Company acquiesced in the tax foreclosure and adhered to the tax debt consolidation system provided by the Argentine government through Federal Executive Decree No. 93/00 to settle the amount duly claimed by Tax Authorities on account of the foreclosure. The system provided for in the abovementioned decree is applicable to obligations past due as of October 31, 1999, even those in dispute as of January 27, 2000, (date on which it was published in the Official Bulletin). It also exempts the parties eligible to be included in the payment facility system from paying any fines or penalties not as yet ruled upon as of January 27, 2000. Since case law and Law No. 23,549 (section 8) have qualified the forfeiture of the right to be reimbursed 50% of compulsory savings stated in section 7 of such regulation as a penalty and that the Company has met the requirements provided for in Federal Executive Decree No. 93/00 for exemptions from penalties, the Company would be entitled to be reimbursed the full amount paid under Law 23,549 (and not only 50%). Such reimbursement should be granted sixty months after the date of the deposit. Consequently, as of December 31, 2000, the Company booked a 6,868,113 receivable in the "Other noncurrent receivables" account. 9. CORPORATE OBJECTIVE CHANGE The Special shareholders' Meeting held on October 17, 2000, unanimously approved the amendment of section 3 of the by-laws incorporating to the corporate objective electric power generation, transformation, transmission, distribution, purchase, sale, import and export activities. Such amendment was registered with the Public Registry of Commerce on December 1, 2000. 17 18 10. RESTRICTIONS ON UNAPPROPRIATED EARNINGS Dividends distributed in cash or in kind in excess of taxable income accumulated through the year-end immediately prior to payment or distribution date will be subject to a 35% income tax withholding as single and definitive payment. For the purposes of this tax, accumulated taxable income is defined as net income booked as of the fiscal year-end immediately preceding the effective date of the law plus the taxable income determined as from such fiscal year. 11. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND US GAAP The Company financial statements have been prepared in conformity with Argentine GAAP in Argentine pesos. Differences between Argentine GAAP and US GAAP are explained below in this note and their effects on net income and shareholders' equity are set forth in note 12. These financial statements comply with the requirements of Item 17 of Form 20-F and therefore do not include certain additional disclosures required by the Securities and Exchange Commission of the United States of America for other purposes. The differences principally relate to the following items: a) Restatements of financial statements for general price-level changes According to Argentine GAAP, the restatement of assets and liabilities into constant Argentine pesos as of the date of the financial statements is required. All nonmonetary assets, liabilities and income statement amounts must be restated to reflect changes in the Argentine general wholesale price index, from the date the assets have been acquired or from the date the liabilities have been incurred, until year-end. The purchasing power gain (loss) included in income (loss) reflects the effect of Argentine inflation on the monetary liabilities of the Company during the year, net of the loss resulting from the effect of inflation on monetary assets held. As from September 1, 1995, pursuant to General Resolution No. 8/95 of the "Inspeccion General de Justicia" (the governmental regulatory agency of corporations), the Company discontinued the application of this method. Accordingly, for periods ending subsequent to September 1, 1995, there was no further restatement of nonmonetary items and recognition of monetary gains and losses. This resolution was adopted under Argentine GAAP so long as the change in the price index applicable to the restatement does not exceed 8% per annum. All financial statement amounts have been restated in constant Argentine Pesos through August 31, 1995, as explained in Note 1.II. Under U.S. GAAP general price level adjustments are not made when there are low levels of inflation. However, as permitted under SEC's rules these adjustments, which are required by Argentine GAAP, have not been removed in performing the reconciliation to U.S. GAAP included in note 12. b) Well conversion costs Under Argentine GAAP, there are no specific requirements governing the treatment for well conversion costs from a gas-lift system to sucker rod pumping system. The Company has charged these costs to expenses as incurred under Argentine GAAP. Under US GAAP, SFAS 19, such costs (equipment and installation) are considered development costs to provide improved recovery systems, and therefore are capitalized as part of the cost of wells. 18 19 c) Income taxes Argentine GAAP income tax expense is based upon the estimated current income tax payable as described in note 1. III. f). When income and expense recognition for income tax purposes does not occur in the same period as income and expense recognition for financial statement purposes, the resulting temporary differences are not considered in the computation of income tax expense for the year. Under US GAAP, Statement of Financial Accounting Standards No. 109 "Accounting for income taxes", requires the liability method to be used to account for deferred income taxes. Under this method, deferred income tax assets or liabilities are recorded for temporary differences that arise between the financial and tax bases of assets and liabilities at each reporting date, as well as for temporary differences arising from other US GAAP adjustments. d) Accounting for pension obligations Under Argentine GAAP, there are no requirements governing the recognition of an employer's liabilities for retirement benefits granted to employees. Petrolera Perez Companc has, however, charged to expenses amounts contributed to the pension fund managed by the Perez Companc Foundation. Under U.S. GAAP, the accounting for these benefits is governed by Statement of Financial Accounting Standards No. 87 ("SFAS 87"), "Employers' Accounting for Pensions" and Statement of Financial Accounting Standards No. 132 ("SFAS 132"), "Employers' Disclosures about Pensions and Other Postretirement Benefits". The U.S. GAAP reconciliation recognizes the effect of adjusting the recorded pension cost and liability to the amounts required under U.S. GAAP. The plan was amended in 1999, resulting in an increase of benefits to the employees. According with the provisions of SFAS 87, under US GAAP amounts, the Company has capitalized the effect of the amendment amortizing such asset according to the future service period of those employees active at the date of the amendment who are expected to receive benefits under the plan. e) New standards for derivative instruments accounting In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This Statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The Statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS 133 is effective for fiscal years beginning after June 15, 2000. SFAS 133 cannot be applied retroactively. SFAS 133 must be applied to a) derivative instruments and b) certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after December 31, 1997 (and, at the Company's election, before January 1, 1998). The Company estimates no effect arising from the adoption of SFAS 133 as of January 1, 2001. Under Argentine GAAP, there are no specific requirements governing accounting for derivative financial instruments. 19 20 12. RECONCILIATION OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP The following is a summary of the significant adjustments to net income for the years ended December 31, 2000 and 1999, and the shareholders' equity as of December 31, 2000 and 1999 which would be required if US GAAP had been applied instead of Argentine GAAP in the Company's financial statements.
2000 1999 ------------ ------------ Net income in accordance with Argentine GAAP 30,428,945 15,869,667 US GAAP adjustments: Well conversion costs 6,483,035 1,956,824 Depreciation of well conversion costs (674,484) (155,470) Pension plan obligations 360,658 (582,914) Deferred income taxes (2,720,361) (368,406) ------------ ------------ Approximate net income under US GAAP 33,877,793 16,719,701 Shareholders' equity in accordance with Argentine GAAP 89,594,659 75,017,714 US GAAP adjustments: Well conversion costs 8,439,859 1,956,824 Depreciation of well conversion costs (829,953) (155,470) Pension plan obligations (575,673) (936,331) Deferred income taxes (2,963,868) (243,508) ------------ ------------ Approximate shareholders' equity under US GAAP 93,665,024 75,639,229
Comprehensive income approximates net income under US GAAP, since no unrealized gain or loss occurred for the years presented. 20 21 EXHIBIT I PETROLERA PEREZ COMPANC S.A. CHANGES IN FIXED ASSETS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in Argentine pesos -- Note 1.II)
2000 -------------------------------------------------------------------------------- ORIGINAL COST -------------------------------------------------------------------------------- BEGINNING ENDING MAIN ACCOUNT BALANCES INCREASES DECREASES TRANSFERS BALANCES ------------------------------------ ----------- ----------- ----------- ----------- ----------- Automobiles 968,811 251,690 362,857 -- 857,644 Furniture and fixtures 1,192,660 -- -- -- 1,192,660 Computer hardware 1,034,618 269,387 -- -- 1,304,005 Facilities 288,626 -- -- -- 288,626 Machinery, receivers and transmitters 384,124 -- -- -- 384,124 Land and buildings 3,142 -- -- -- 3,142 Wells and production installations 143,653,285 -- -- 13,610,166 157,263,451 Construction in process 4,364,502 9,221,408 522,034 (7,900,068) 5,163,808 Materials in use and equipment in deposit 1,715,678 5,554,578 309,231 (5,710,098) 1,250,927 Prepayments to vendors -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- Total as of 2000 153,605,446 15,297,063 1,194,122 -- 167,708,387 =========== =========== =========== =========== =========== Total as of 1999 143,344,920 10,662,224 401,698 -- 153,605,446 =========== =========== =========== =========== =========== Total as of 1998 124,185,309 19,182,745 23,134 -- 143,344,920 =========== =========== =========== =========== ===========
2000 1999 1998 ------------------------------------------------------------------ ---------- --------- ACCUMULATED DEPRECIATION ---------------------------------------------------- BEGINNING ENDING NET NET NET MAIN ACCOUNT BALANCES INCREASES DECREASES BALANCES BOOK VALUE BOOK VALUE BOOK VALUE ---------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Automobiles 830,246 97,165 362,633 564,778 292,866 138,565 203,715 Furniture and fixtures 959,109 119,266 -- 1,078,375 114,285 233,551 352,166 Computer hardware 857,563 115,137 -- 972,700 331,305 177,055 204,865 Facilities 264,574 24,052 -- 288,626 -- 24,052 52,915 Machinery, receivers and transmitters 172,694 41,614 -- 214,308 169,816 211,430 218,623 Land and buildings 1,288 63 -- 1,351 1,791 1,854 1,917 Wells and production installations 76,206,084 7,981,936 -- 84,188,020 73,075,431 67,447,201 65,848,726 Construction in process -- -- -- -- 5,163,808 4,364,502 2,562,267 Materials in use and equipment in deposit -- -- -- -- 1,250,927 1,715,678 2,013,743 Prepayments to vendors -- -- -- -- -- -- 60,725 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total as of 2000 79,291,558 8,379,233 362,633 87,308,158 80,400,229 ========== ========== ========== ========== ========== Total as of 1999 71,825,258 7,859,390 393,090 79,291,558 74,313,888 ========== ========== ========== ========== ========== Total as of 1998 63,751,419 8,162,842 89,003 71,825,258 71,519,662 ========== ========== ========== ========== ==========
21 22 EXHIBIT II PETROLERA PEREZ COMPANC S.A. FOREIGN CURRENCY ASSETS AND LIABILITIES AS OF DECEMBER 31, 2000 AND 1999
1999 2000 -------------------- --------------------------------------------------- TYPE OF FOREIGN TYPE OF FOREIGN EXCHANGE BOOK CURRENCY AND CURRENCY AND RATE AMOUNT IN AMOUNT AMOUNT (IN PESOS) PESOS -------------------- --------------------- --------------- ---------- CURRENT ASSETS Cash US$ 2,104 US$ 4,124 (1) 0.999 4,120 Investments US$ 2,681,785 US$ 9,414,133 (1) 0.999 9,404,719 Trade receivables: Related company US$ 1,596,752 US$ 58,083 (1) 0.999 58,025 Other customers US$ 5,229,184 US$ 8,371,780 (1) 0.999 8,363,409 ---------- Total foreign currency assets 17,830,273 ========== CURRENT LIABILITIES Trade payables: Other vendors US$ 913,506 US$ 827,863 (2) 1.000 827,863 Related companies US$ 630,520 US$ 316,450 (2) 1.000 316,450 ---------- Total foreign currency liabilities 1,144,313 ==========
(1) Buying exchange rate for remittances of Banco Nacion. (2) Selling exchange rate for remittances of Banco Nacion. 22 23 EXHIBIT III PETROLERA PEREZ COMPANC S.A. INFORMATION REQUIRED UNDER ARTICLE 64, POINT I, CLAUSE B) OF LAW NO. 19,550 FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Stated in pesos - Note 1.II)
1998 1999 2000 ----------- ----------- ----------------------------------------------------------------------- OPERATING ADMINISTRATIVE SELLING EXPLORATION MAIN ACCOUNT TOTAL TOTAL TOTAL EXPENSES EXPENSES EXPENSES EXPENSES ------------------------- ----------- ----------- ----------- ----------- -------------- ----------- ----------- Salaries and wages 4,033,391 3,669,350 3,644,174 2,189,916 1,228,167 -- 226,091 Social security taxes 746,273 590,133 491,995 305,384 158,237 -- 28,374 Other benefits to personnel 830,013 824,857 1,857,955 560,067 1,254,280 -- 43,608 Taxes, charges and 181,652 81,701 289,798 -- 130,649 159,149 -- contributions Directors' and consultants' 635,105 370,701 822,786 -- 808,464 14,322 -- fees Spares and repairs 2,492,431 2,232,776 5,443,750 5,443,750 -- -- -- Freight and haulage 3,080,969 2,796,240 3,134,292 9,773 -- 3,124,519 -- Production services 8,998,028 7,040,024 8,332,931 7,892,133 202,559 238,239 -- General expenses 771,771 724,720 616,995 99,871 467,975 49,149 -- Fixed assets depreciation 8,162,842 7,859,390 8,379,233 8,379,233 -- -- -- Research and development 1,109,726 192,547 627,504 -- -- -- 627,504 Royalties 5,669,671 7,182,677 10,659,914 10,659,914 -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total as of 2000 44,301,327 35,540,041 4,250,331 3,585,378 925,577 =========== =========== =========== =========== =========== Total as of 1999 33,565,116 27,439,521 2,543,994 3,111,166 470,435 =========== =========== =========== =========== =========== Total as of 1998 36,711,872 28,290,402 3,216,410 3,683,903 1,521,157 =========== =========== =========== =========== ===========
23 24 EXHIBIT IV PETROLERA PEREZ COMPANC S.A. BREAK DOWN FOR MATURITY OF INVESTMENTS, RECEIVABLES AND LIABILITIES AS OF DECEMBER 31, 2000 (Stated in pesos -- Note 1.II)
ASSETS LIABILITIES ------------------------------------ ------------------- TERM INVESTMENTS RECEIVABLES OTHER LIABILITIES(1) ------------------------------------ --------------- -------------- ------------------- WITHOUT MATURITY 971,808 (3) 1,301,116 (4) 1,177,900 ----------- ----------- ----------- WITH MATURITY NOT YET DUE: - Up to three months 9,552,728 10,053,096 8,598,851 - From three to six months -- -- (5) 10,901,869 - More than four years -- 6,868,113 -- ----------- ----------- ----------- TOTAL WITH MATURITY (2) 9,552,728 16,921,209 19,500,720 ----------- ----------- ----------- TOTAL 10,524,536 18,222,325 20,678,620 =========== =========== ===========
(1) Total liabilities less reserves. (2) Accrues a fixed average nominal interest rate of approximately 7% per annum. (3) Collection is estimated in a period longer than a year. (4) Accrues no interest. Includes 1.170.400 which is estimated not to be paid in the next twelve months. (5) Approximately 15% accrues interest. 24 25 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) By: /s/ Thomas Bueno ------------------------- Thomas Bueno General Manager, Controller and Chief Accounting Officer (Duly Authorized Officer of the Registrant), June 20, 2001 25 26 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 24 Power of Attorney.