10-K/A 1 d97356a2e10vkza.txt AMENDMENT NO. 2 TO FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Amendment #2 (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, 2001 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 13, 2002, was $48,554,401. This value was calculated based upon the average bid and asked prices of the registrant's stock of $21.25 on March 13, 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 13, 2002 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 Apco Argentina Inc. ("the Company") hereby amends its Annual Report on Form 10-K for the fiscal year ended December 31, 2001 for the purpose of amending Notes 12 and 13 of the Notes to Financial Statements as of December 31, 2001, 2000, and 1999 of Petrolera Perez Companc S.A. ("Petrolera"), an Argentine corporation. The Company is required to file the financial statements of Petrelera, a significant investee, as required by Rule 3-09 of Regulation S-X. This amendment also incorporates Exhibit 99 - Notification of Pistrelli, Diaz y Associados representations by way of a letter from the Company to the commission pursuant to temporary Note 3T. Pistrelli, Diaz y Associados is a member firm of Arthur Andersen LLP. The audited balance sheets of Petrolera as of December 31, 2001 and 2000, and the related statements of income, changes in shareholders' equity and cash flow for the years ended December 31, 2001 2000 and 1999 are unaffected by the revisions to Notes 12 and 13. 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 (99) - Notification of Pistrelli, Diaz y Associados representatives REPORT OF INDEPENDENT PUBLIC ACCOUNTS To the Board of Directors of PETROLERA PEREZ COMPANC SOCIEDAD ANONIMA: We have audited the balance sheets of PETROLERA PEREZ COMPANC S.A. (an Argentine corporation) as of December 31, 2001 and 2000, related statements of income, changes in shareholders' equity and cash flows for the years ended December 31, 2001, 2000 and 1999, and information presented in Exhibits I to IV, 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 auditing standards generally accepted 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 us a reasonable basis for our opinion. As described in note 11 to the accompanying financial statements, in the last few months, a significant change has been implemented in the economic model of Argentina as well as in the Convertibility Law that was in place since March 1991 (whereby the Argentine peso was pegged at parity with the US dollar). The main consequences of the set of measures adopted by the Argentine Federal Government, which are detailed in the above mentioned note, have been (a) the devaluation of the Argentine peso with respect to the US dollar and dedollarization of certain foreign currency denominated assets and liabilities held in the country, the effects of which will be recognized in 2002 in accordance with Argentine generally accepted accounting principles; (b) the implementation of restrictions on the withdrawal of funds deposited with financial institutions; (c) the restriction on transfers abroad; and (d) the increase in domestic prices. The future development of the economic crisis may require further measures from the Argentine Federal Government. The accompanying financial statements should be read taking into account the issues mentioned above. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PETROLERA PEREZ COMPANC S.A. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years ended December 31, 2001, 2000 and 1999, in conformity with generally accepted accounting principles in Argentina. Certain accounting practices used by the Company in preparing the accompanying financial statements conform with accounting principles generally accepted in Argentina, but do not conform with accounting principles generally accepted 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 effect of those differences on net income and shareholders' equity are set forth in notes 12 and 13 to the accompanying financial statements. Buenos Aires, Argentina February 4, 2002 PISTRELLI, DIAZ Y ASOCIADOS C.P.C.E.C.F. Vol. 1 - Fo. 8 DANIEL G. MINENNA Partner C.P.A. University of Buenos Aires C.P.C.E.C.F. Vol. 175 - Fo. 221 PETROLERA PEREZ COMPANC S.A. Maipu 1 - 18th floor - Buenos Aires FISCAL YEAR NO. 48 BEGINNING JANUARY 1, 2001 FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001 AND 2000 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 Argentine pesos)
SUBSCRIBED, ISSUED, DESCRIPTION OF THE SHARES REGISTERED AND PAID-IN ------------------------- ---------------------- Nominative, common and non-endorsable shares, 1 peso par value, 1 vote each 411,900 Nominative, preferred, non-endorsable and nonvoting shares, 1 peso 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. 1 PETROLERA PEREZ COMPANC S.A. BALANCE SHEETS AS OF DECEMBER 31, 2001 AND 2000 (Stated in Argentine pesos -- Note 1.II)
2001 2000 ------------ ------------ CURRENT ASSETS Cash 649,113 863,604 Investments (Note 2.a) 4,484,762 10,524,536 Trade receivables (Note 2.b) 4,969,602 8,936,404 Other receivables (Note 2.c) 1,840,670 1,116,692 Inventories (Note 2.d) 1,048,772 1,070,813 ------------ ------------ Total current assets 12,992,919 22,512,049 ------------ ------------ NONCURRENT ASSETS Investments (Note 2.a) 2,019,428 -- Other receivables (Note 2.c) 7,180,978 6,998,829 Fixed assets (Exhibit I) 80,971,630 80,400,229 ------------ ------------ Total noncurrent assets 90,172,036 87,399,058 ------------ ------------ Total assets 103,164,955 109,911,107 ============ ============ CURRENT LIABILITIES Trade payables (Note 2.e) 5,436,493 4,963,498 Short - term debt 2,019,897 -- Payroll and social security taxes 664,845 505,361 Taxes payable (Note 2.f) 577,783 13,317,302 Other liabilities (Note 2.g) 586,296 722,059 ------------ ------------ Total current liabilities 9,285,314 19,508,220 ------------ ------------ NONCURRENT LIABILITIES Reserves for contingencies (Note 2.h) 431,942 808,228 ------------ ------------ Total liabilities 9,717,256 20,316,448 SHAREHOLDERS' EQUITY (Per respective statements) 93,447,699 89,594,659 ------------ ------------ Total liabilities and shareholders' equity 103,164,955 109,911,107 ============ ============
The accompanying notes 1 to 13 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 2 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Stated in Argentine pesos --Note 1.II)
2001 2000 1999 ------------ ------------ ------------ NET REVENUES 81,279,530 95,252,353 60,855,496 OPERATING COSTS (Note 2.i) (41,328,348) (42,416,380) (30,520,756) ------------ ------------ ------------ Gross profit 39,951,182 52,835,973 30,334,740 ADMINISTRATIVE EXPENSES (Exhibit III) (3,926,847) (4,250,331) (2,543,994) SELLING EXPENSES (Exhibit III) (3,278,847) (3,585,378) (3,111,166) EXPLORATION EXPENSES (Exhibit III) (4,846,250) (925,577) (470,435) ------------ ------------ ------------ Exploitation profits 27,899,238 44,074,687 24,209,145 OTHER (EXPENSES) INCOME, net (Note 2.j) (269,135) 1,562,600 57,218 FINANCIAL INCOME AND HOLDING GAINS, net 1,012,937 341,658 253,304 ------------ ------------ ------------ Income before income tax 28,643,040 45,978,945 24,519,667 INCOME TAX (Note 1.III.f) (10,390,000) (15,550,000) (8,650,000) ------------ ------------ ------------ Net income for the year 18,253,040 30,428,945 15,869,667 ============ ============ ============
The accompanying notes 1 to 13 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 3 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (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, 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 Cash dividends approved by Regular Shareholders' Meetings -- -- -- -- (14,400,000) (14,400,000) Net income for the year -- -- -- -- 18,253,040 18,253,040 ------------ ------------ ------------ ------------ -------------- ------------ Balance as of December 31, 2001 500,000 82,041 100,000 1 92,765,657 93,447,699 ============ ============ ============ ============ ============== ============
The accompanying notes 1 to 13 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 4 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF CASH FLOWS(a) FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Stated in Argentine pesos - Note 1.II)
2001 2000 1999 ------------ ------------ ------------ FUNDS PROVIDED BY OPERATIONS: NET INCOME FOR THE YEAR 18,253,040 30,428,945 15,869,667 ADJUSTMENTS TO RECONCILE NET INCOME FOR THE YEAR TO NET FUNDS PROVIDED BY OPERATIONS: Fixed assets depreciation 12,614,824 8,379,233 7,859,390 Decrease in fixed assets 22,962 831,489 8,608 Abandoned exploratory wells and retirement of non-producing assets 4,500,634 -- -- Net increase (decrease) in reserves for contingencies 80,822 (792,285) -- CHANGES IN ASSETS AND LIABILITIES: Decrease (increase) in trade receivables 3,966,802 (1,838,631) (3,055,533) (Increase) decrease in other receivables (906,127) (7,064,202) 780,393 Decrease (increase) in inventories 22,041 299,086 (41,058) Increase in trade payables 2,394,282 3,392,596 1,689,313 Increase (decrease) in payroll and social security taxes 159,484 101,294 (85,953) (Decrease) increase in taxes payable (12,739,519) 6,396,806 5,485,307 (Decrease) increase in other liabilities (135,763) (1,862,677) 95,527 Decrease in reserves for contingencies (457,108) -- -- ------------ ------------ ------------ NET FUNDS PROVIDED BY OPERATIONS 27,776,374 38,271,654 28,605,661 ------------ ------------ ------------ FUNDS USED IN INVESTING ACTIVITIES: Fixed assets acquisitions (19,631,108) (17,461,541) (15,311,758) Increase in non-current investments (2,019,428) -- -- ------------ ------------ ------------ FUNDS USED IN INVESTING ACTIVITIES (21,650,536) (17,461,541) (15,311,758) ------------ ------------ ------------ FUNDS USED IN FINANCING ACTIVITIES: Increase in short-term debt 2,019,897 -- -- Dividends paid (14,400,000) (15,852,000) (12,337,095) ------------ ------------ ------------ NET FUNDS USED IN FINANCING ACTIVITIES (12,380,103) (15,852,000) (12,337,095) ------------ ------------ ------------ Net (decrease) increase in funds (6,254,265) 4,958,113 956,808 Funds at beginning of year 11,388,140 6,430,027 5,473,219 ------------ ------------ ------------ Funds at end of year 5,133,875 11,388,140 6,430,027 ============ ============ ============
(a) Cash on hand and in bank plus equivalent investments (original placements maturing in less than three months). The accompanying notes 1 to 13 and the supplementary statements (Exhibits I to IV) are an integral part of these financial statements. 5 PETROLERA PEREZ COMPANC S.A. NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001, 2000 AND 1999 (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 as of December 31, 2001, 2000 and 1999, 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 those differences on Petrolera Perez Companc S.A.'s net income and shareholders' equity are set forth in notes 12 and 13, 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 years. While it is believed that such estimates are reasonable, actual results could differ from those estimates. On December 21, 2001, the Professional Council in Economic Sciences of the City of Buenos Aires (CPCECABA) issued resolutions No. 238/01, 243/01, 261/01 and 262/01, approving, with certain changes, Technical Resolutions No. 16, 17, 18 and 19, respectively, of the Argentine Federation of Professional Councils in Economic Sciences (FACPCE). Among other issues, the new accounting principles provide for: (i) express prohibitions on the capitalization of certain deferred charges and transition rules for the accounting treatment of intangible assets recorded at the beginning of their application, which do not qualify as such under the new principles, (ii) mandatory application of deferred tax accounting by measuring deferred tax receivable and payable balances on discounted basis, (iii) changes in frequency and methodology for comparing assets to recoverable values, (iv) changes in the capitalization of financial costs from third parties' capital under extensive construction or production processes and (v) use of discounted values for measuring certain assets and liabilities. The effect of the applications of the new accounting principles may affect the results of previous years. Application of such resolutions will be mandatory for years commencing after July 1, 2002, and may be applied before that date. Company Management has not exercised such option and, as of the date of issuance of these financial statements, is analyzing the effect of the new accounting standards. 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. The concessionaire has the option to obtain a 10-year extension, subject to government approval. 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, 2001, 2000 and 1999 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 ========
6 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, 2001 and 2000, is as follows:
2001 2000 ---------- ---------- Current assets 5,293,726 5,100,040 Noncurrent assets 88,152,608 87,399,005 ---------- ---------- Total assets 93,446,334 92,499,045 ========== ========== Current liabilities 7,129,603 10,369,730 Noncurrent liabilities 431,942 574,228 ---------- ---------- Total liabilities 7,561,545 10,943,958 ========== ==========
The Company's percentage interest (73.15%) in the costs and expenses allocated to the concession, which are included in the statements of income for the years ended December 31, 2001, 2000 and 1999, is as follows:
2001 2000 1999 ------------ ------------ ------------ Operating costs (41,451,014) (42,027,055) (30,520,756) Administrative expenses (3,921,908) (4,242,196) (2,543,873) Selling expenses (2,619,615) (2,774,986) (3,111,166) Exploration expenses (4,846,250) (925,577) (470,435) Other (expenses) income, net (351,445) 1,382,473 254,445 Financial income and holding gains, net 486,749 280,077 253,304 ------------ ------------ ------------ Total costs and expenses for the year (52,703,483) (48,307,264) (36,138,481) ============ ============ ============
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. 7 - 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 (see Note 11). Financial income (expense) accrued through each year-end, have been added to or deducted from receivables and payables, as applicable. (b) INVESTMENTS: - Time deposits and unlisted government debt securities: at face value plus interest accrued through each year-end. If applicable, balances were converted at the exchange rates in effect at each year-end for the settlement of these transactions (see Note 11). - Mutual funds: at mutual fund share price at each year-end, net of the necessary expenditures for its sale. (c) INVENTORIES: - Hydrocarbons: at production 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 expiration of the concession. The Company uses the successful efforts method of accounting for its oil and gas exploration and production activities. Under its method, exploration costs, excluding the costs of exploratory wells, are charged to expenses as incurred. Drilling costs of exploratory wells, including stratigraphic test wells are capitalized pending determination of whether proved reserves exist which justify commercial development. If such reserves are not found, the drilling costs are charged to expense for the year. Drilling costs of productive wells and of dry holes drilled for development of oil and gas reserves are capitalized. Other development costs to provide improved recovery systems are capitalized, except well conversion costs from gas-lift system to sucker rod pumping system, which are charged to expenses as incurred. Estimated future restoration and abandonment costs are accrued according to the unit of production method. 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: Certain conditions may exist as of the date of financial statements, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. Such contingent liabilities are assessed by the Company's management based on the opinion of the Company's legal counsel and the available evidence. Such contingencies include outstanding lawsuits or claims for damages to third parties in the ordinary course of the Company's business, as well as third party claims arising from disputes concerning the interpretation of legislation. 8 If the assessment of a contingency indicates that it is probable that a loss has been incurred and the amount can be estimated, a liability is accrued in the Reserve for contingencies account. If the assessment indicates that a potential loss contingency is not probable, but is reasonably possible, or is probable but it can not be estimated, then the nature of the contingent liability, together with an estimate of the possibility of occurrence, is disclosed in a note to the financial statements. Loss contingencies considered remote are not disclosed unless they involve guarantees, in which case the nature of the guarantee is disclosed. (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 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, 2001, 2000 and 1999, 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, 2001, 2000 and 1999 were 10,390,000, 15,550,000 and 8,650,000, 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. (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 includes the following items: o Nominal interest income and expenses o Holding gains (losses) on revaluation of inventories at replacement cost o Differences in the market value of mutual funds. - The accounts accruing monetary transactions were computed at face 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. 9 2. BREAKDOWN OF THE MAIN ACCOUNTS The main accounts in the Company's financial statements breakdown as follows:
2001 2000 ------------ ------------ (a) INVESTMENTS: CURRENT: Time deposits 4,029,316 9,552,728 Mutual funds 455,446 971,808 ------------ ------------ 4,484,762 10,524,536 ============ ============ NONCURRENT: Unlisted government debt securities 2,019,428 -- ============ ============ (b) TRADE RECEIVABLES: Related company: Pecom Energia S.A. 2,363,733 206,189 Other customers 2,605,869 8,730,215 ------------ ------------ 4,969,602 8,936,404 ============ ============ (c) OTHER RECEIVABLES: CURRENT: VAT receivable 1,024,056 -- Income tax prepayments and withholdings (net of accrual) 174,371 -- Prepaid expenses 202,609 217,969 Advances to personnel 54,785 106,311 Prepayments to vendors 61,222 93,091 Other 323,627 699,321 ------------ ------------ 1,840,670 1,116,692 ============ ============ NONCURRENT: Compulsory saving receivable (Note 8) 7,084,171 6,868,113 Taxes to be recovered (Note 7) 1,201,854 1,201,854 Allowance for taxes to be recovered (1,201,854) (1,201,854) Other 96,807 130,716 ------------ ------------ 7,180,978 6,998,829 ============ ============
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2001 2000 ---------- ---------- (d) INVENTORIES: Hydrocarbons 487,778 365,112 Materials and spares 560,994 705,701 ---------- ---------- 1,048,772 1,070,813 ========== ========== (e) TRADE PAYABLES: Related companies: Pecom Energia S.A. 136,667 273,479 Oleoductos del Valle S.A. 195,768 236,501 Other vendors 5,104,058 4,453,518 ---------- ---------- 5,436,493 4,963,498 ========== ========== (f) TAXES PAYABLE: Royalty accrual 480,336 855,855 Income tax accrual (net of withholding and prepayments) -- 8,881,379 Compulsory saving payables (Note 8) -- 3,350,444 VAT payable -- 110,909 Other 97,447 118,715 ---------- ---------- 577,783 13,317,302 ========== ========== (g) OTHER LIABILITIES: Directors' and Statutory Auditor's fees 339,416 345,268 Retirement and pension fund (Note 6) 239,380 369,291 Other 7,500 7,500 ---------- ---------- 586,296 722,059 ========== ==========
2001 2000 1999 ---------- ---------- ---------- (h) RESERVES FOR CONTINGENCIES: At beginning of year 808,228 1,600,513 1,600,513 Decreases of year (376,286)(1) (792,285)(2) -- ---------- ---------- ---------- At end of year 431,942 808,228 1,600,513 ========== ========== ==========
(1) Includes (457,108) related to contingencies reversals and 80,822 charged to income for the year. (2) Credited to "Other (expenses) income, net" of the income statement. 11
2001 2000 1999 ------------ ------------ ------------ (i) OPERATING COSTS: Beginning inventory 1,070,813 1,369,899 1,328,841 ------------ ------------ ------------ Purchases 2,932,102 6,577,253 3,122,293 Operating expenses (Exhibit III) 38,374,205 35,540,041 27,439,521 ------------ ------------ ------------ 41,306,307 42,117,294 30,561,814 ------------ ------------ ------------ Ending inventory (1,048,772) (1,070,813) (1,369,899) ------------ ------------ ------------ 41,328,348 42,416,380 30,520,756 ============ ============ ============ (j) OTHER (EXPENSES) INCOME, NET: Net (increase) decrease of reserves for contingencies (80,822) 792,285 -- Tax on bank transactions (363,026) -- -- Other 174,713 770,315 57,218 ------------ ------------ ------------ (269,135) 1,562,600 57,218 ============ ============ ============
3. TRANSACTIONS WITH RELATED COMPANIES Receivables and payables as of December 31, 2001, 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, 2001, 2000 and 1999, include:
REVENUES FROM HYDROCARBONS SOLD ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- Related company: Pecom Energia S.A. 3,926,918 21,019,857 19,687,990 ========== ========== ==========
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PURCHASES AND OPERATING EXPENSES ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- Related companies: Pecom Energia S.A. 967,909 2,162,572 2,584,449 Oleoductos del Valle S.A. 2,557,155 2,489,670 2,411,300 Petroleum Commercial Supply Inc. 7,150 8,412 101,225 ---------- ---------- ---------- 3,532,214 4,660,654 5,096,974 ========== ========== ==========
4. MAIN CUSTOMERS Main customers with whom the Company did business during the respective years ended December 31, 2001, 2000 and 1999, are as follows: (a) Oil (accounts for 81%, 84% and 73%, respectively, of total sales):
% SHARE ------------------ CUSTOMER: 2001 2000 1999 ---- ---- ---- Petrobras Petroleo Brasileno S.A. 59 56 29 Shell C.A.P.S.A. 26 21 29 YPF S.A. 8 -- -- EG3 S.A. 4 -- -- Pecom Energia S.A. 3 23 41 Tosco Refining Co. -- -- 1 ---- ---- ---- 100 100 100 ==== ==== ====
(b) Natural gas (accounts for 14%, 13% and 24%, respectively, of total sales):
% SHARE ------------------ CUSTOMER: 2001 2000 1999 ---- ---- ---- Camuzzi Gas Pampeana S.A. 56 76 69 Pecom Energia S.A. 21 18 9 Duke Energy Gas Trading & Marketing Argentina S.R.L. 13 -- -- Loma Negra Cia. Industrial Argentina S.A. 7 -- -- Litoral Gas S.A. -- -- 10 Metrogas S.A. -- -- 7 Other 3 6 5 ---- ---- ---- 100 100 100 ==== ==== ====
13 (c) Propane and butane (accounts for 5%, 3% and 3%, respectively, of total sales):
% SHARE ------------------ CUSTOMER: 2001 2000 1999 ---- ---- ---- Abastecedora de Combustibles S.A. (Chile) 26 24 26 Enagas S.A. Distribuidora de Gas (Chile) 23 28 19 Totalgaz Argentina S.A. 22 32 27 Careri J. C. y Careri P. 20 10 -- Sur Gas S.A. 3 2 6 Castex Gas S.A. -- -- 6 Dimarco S.A. -- -- 4 Other 6 4 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, after deducting 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. 6. RETIREMENT AND PENSION FUND All Company employees as of May 31, 1995, and with the required seniority are eligible for this benefit. It is based on 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. Upon retirement, employees have the right to receive a fixed monthly payment. The plan requires from the Company a contribution to a fund; no contribution being required from employees. To the date of issuance of these financial statements, the Company estimates that all funds have been fully contributed to comply with such benefit. 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; this appeal was rejected. 14 In March 1994, the Company paid the amount claimed, which represents 1,201,854 to its 73.15% interest in the consortium. After a number of Company appeals, which were rejected, in October 2001 the Company filed a complaint for denied appeal with the Argentine Supreme Court. Resolution of such complaint has not been resolved yet. The opinion of both the Company's management and legal counsel, is that the Federal Executive Power (Direccion Nacional de Normalizacion Patrimonial - Federal institution reporting to the Ministry of Economy) 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. As of December 31, 2001, the amount to be recovered of 1,201,854, is presented in the noncurrent receivables account (note 2.c), fully offset by an allowance. 8. COMPULSORY SAVING After a protracted judicial process regarding an ex-officio assessment of the compulsory savings for 1988 and 1989, which had been initiated in 1993 and concluded in 2000 with the ruling of the Supreme Court of Justice of the Nation, the Company paid the DGI (Argentine federal tax bureau) the amount claimed pursuant to an installment plan offered by Federal Executive Decree No 93/00; under this system, adherents enjoy the benefit of relief from any penalties other than those imposed by firm judicial ruling. Consequently, as of December 31, 2001, the Company has booked a 7,084,171 receivable in the "Other noncurrent receivables" account, which accrues the interest rate effective for bank savings accounts. 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. 10. RESTRICTIONS ON UNAPPROPIATED 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. 15 11. EFFECTS OF THE ARGENTINE PESO DEVALUATION AND OTHER CHANGES IN ECONOMIC RULES AND REGULATIONS Since early December 2001, Argentine authorities implemented a number of monetary and exchange control measures that mainly included restrictions on the free disposition of funds deposited with banks and the practical impossibility of making transfers abroad, with the exception of transfers related to foreign trade. Later, the Federal Government declared the official default on foreign debt payments and, on January 6, 2002, the Argentine Congress approved Law No. 25,561 on Public Emergency and Exchange System Reform that introduced dramatic changes to the economic model implemented until that date and that amended the Convertibility Law (the currency board that pegged the Argentine peso at parity with the US dollar) approved in March 1991. The new law empowers the Federal Executive to implement, among other things, additional monetary, financial and exchange measures to overcome the economic crisis in the medium term. Federal Executive Decree No. 71/2002 and Communique "A" 3425, as amended, of the Central Bank of Argentina (the BCRA) established an "official" exchange system, mainly for exports, certain imports, and financial debts, and a "freely floating" exchange market for the rest of the transactions. The "official" exchange rate was fixed at ARS 1.4 to USD 1, and the "freely floating" exchange rate as of the close of business of the first day after the exchange market reopened (January 11, 2002), which had been suspended since December 23, 2001, ranged from ARS 1.60 to ARS 1.70 to USD 1 (selling rate). Other regulations were issued subsequently, which further amended the new regulations then in effect. The main aspects of such other regulations as of the approval date of these financial statements are summarized below: (a) consolidation of exchange markets into a "free" market for negotiating foreign trade transactions and, with prior authorization of the BCRA, financial transactions. As of February 1, 2002, the exchange rate in such market was ARS 2.05 and ARS 2.10 to USD 1, for the buying and selling rate, respectively; (b) restrictions on the free disposition of funds deposited with banks; (c) de-dollarization of deposits in US dollars with Argentine banks at the ARS 1.40 to USD 1 rate and of all US dollar-denominated obligations assumed as of January 6, 2002, in Argentina at a ARS 1 to USD 1 rate. Deposits and debts switched into pesos will be subsequently adjusted by a "benchmark stabilization coefficient" to be published by the BCRA and which will be applied as from the publication date of Decree No. 214/2002, plus a minimum and maximum interest rate for deposits with and loans from the banking system, respectively, fixed by the BCRA; (d) issuance of an Argentine Government bond to compensate financial institutions for the difference generated by the application of the exchange rates mentioned above; (e) de-dollarization of all private agreements executed before January 6, 2002, at a ARS 1 to USD 1 rate and subsequent adjustment by the benchmark stabilization coefficient under the terms stated in (c); (f) de-dollarization of utility rates which were originally agreed upon in US dollars and subsequent renegotiation on a case-by-case basis; (g) implementation of new withholding systems for hydrocarbons exports; (h) 180-day suspension of unjustified dismissals; should any such dismissals occur, they will carry the penalty of having to pay double the termination pay provided by current labor legislation; (i) two-year suspension of the bank-deposits unseizability law; and (j) 180-day suspension as from February 3, 2002, of all lawsuits, precautionary measures, and foreclosure proceedings on loans, debts, deposits, and financial rescheduling affected by the new economic measures. 16 To the approval date of these financial statements, the Federal Government is analyzing supplementary policies that will define, among other things, the way in which secured loans in US dollars related to the domestic public debt swap will be switched into pesos and the way in which private external debt payments will be made. On the other hand, and as a consequence of the changes implemented in January, there was an increase in the Argentine consumer price index of 2.3% and in the Argentine wholesale price index of 6.6% according to the information provided by the INDEC (Argentine Institute of Statistics and Census). As stated in Exhibit II, assets and liabilities in foreign currency as of December 31, 2001, were valued at the ARS 1 to USD 1 exchange rate which was effective as of the suspension date of exchange market transactions mentioned above, according to the provisions of Resolution MD No. 1/02 of the CPCECABA (Professional Council in Economic Sciences of the City of Buenos Aires). The net position of assets and liabilities in foreign currency, that would generate effects as a result of the devaluation occurred through the approval date of the financial statements is disclosed in Exhibit II of these financial statements. Such position has not suffered significant changes as of the approval date of these financial statements. The estimated effect of subsequent devaluations as of the date of issuance of these financial statements, on the net position in foreign currency gives rise to a positive exchange difference of about 3,400,000, that will be recorded in the year ending December 31, 2002, according to current accounting standards. As provided in the Public Emergency and Exchange System Reform Law mentioned above, the gain resulting from applying the new exchange rate to the net position of assets and liabilities in foreign currency as of January 6, 2002, will be taxable in the fiscal year ending December 31, 2002. This note to the financial statements includes the effects derived from the new economic and exchange policies known to the release date thereof. All estimates made by Company Management have contemplated such policies. The effects of any additional measures to be implemented by the Government and of the regulations to be issued on measures adopted before will be recorded in the financial statements once the Company's management becomes aware of their existence. 12. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND US GAAP The Company's 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 13. 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. 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 17 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 13. (b) Valuation of inventories Under Argentine GAAP, materials and spares parts are accounted for at replacement cost. Under US GAAP, materials and spares parts are accounted for at historical cost. The effects of such differences for all periods presented were not material. (c) 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. (d) 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. (e) 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. (f) Change in estimates of fixed assets depreciation Due to changed circumstances in Argentina resulting from the country's recent economic problems, described in note 11, the Company feels that because the granting of the ten year extension requires government approval, it is now appropriate to differentiate between reserves estimated to be produced through 2016, and reserves expected to be produced over the ten year extension period. Although the Company has since 1968 successfully obtained Entre Lomas contract extensions on several occasions, the Company feels that reserves attributable to the extension period, or 2017-2026, that would otherwise be classified as proved using conventional engineering methods of estimating reserves, should in light of changed circumstances, be reclassified to the probable category. Therefore, in the last quarter of 2001 the Company has changed its estimate of proved and developed reserves. Under Argentine GAAP, the effect of such change on wells and production installations depreciation, is accounted for as from the beginning of the year. 18 Under US GAAP, the effect of the change in accounting estimate is accounted for prospectively from the last quarter of the year 2001. (g) Derivative instruments accounting Under US GAAP, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") 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 became effective for the Company on January 1, 2001. The Company does not use derivative instruments. Therefore, the adoption of SFAS 133 for US GAAP purposes had no impact on the Company's financial statements. Under Argentine GAAP, there are no specific requirements governing accounting for derivative financial instruments. (h) Accounting for asset retirement obligation In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations". Currently the Company accrues future abandonment costs of wells and related facilities through its depreciation calculation and includes the cumulative accrual in accumulated depreciation. The new standard will require that the Company record under US GAAP the entire fair value of the retirement obligation as a liability at the time a well is drilled or acquired. The liability will accrete over time with a charge to interest expense. The new standard will apply to financial statements for the years beginning after June 15, 2002. While the new standard will require that the Company change its accounting for such abandonment obligations, Petrolera Perez Companc S.A. will adopt SFAS No. 143 for US GAAP purposes as from January 1, 2003. The Company has not quantified the impact of adopting SFAS No. 143 and expects to conclude it during 2002. (i) Impairment or disposal of long-lived assets accounting In August 2001, the Financial Accounting Standards Board issued SFAS No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Petrolera Perez Companc S.A. will adopt this statement for US GAAP purposes as from January 1, 2002. Based on the available information the Company does not expect adoption of the provisions of SFAS 144 to have a material impact either on US GAAP earnings or shareholders' equity. (j) Exchange difference for the valuation of assets and liabilities in foreign currency As stated in Note 11, under Argentine GAAP, assets and liabilities in foreign currency as of December 31, 2001, were valued at the ARS 1 to USD 1 exchange rate which was effective as of the suspension date of exchange market transactions. Under US GAAP, assets and liabilities in foreign currency as of December 31, 2001, should be valued at the exchange rates effective as of January 11, 2002, when the exchange market reopened, as stated in paragraph 26 of the Statement of Financial Accounting Standards (SFAS) No. 52 and Topic D-12 of the Emerging Issues Task Force, both from the Financial Accounting Standards Board. As mentioned in Note 11, the "freely floating" exchange rate at the close of business of the first day the exchange market reopened was ARS 1.65 and ARS 1.70 to USD 1, buying and selling rate, respectively. As of December 31, 2001, the estimated total effect of the devaluation of the Argentine peso at such exchange rate, was a positive exchange difference of 2,318,064, which was included in reconciliations of Net Income and Shareholders' equity to US GAAP presented in note 13. In addition, for income tax purposes under US GAAP, as of December 31, 2001, the Company recognized a deferred tax liability of approximately 811,322 in relation to the net positive exchange difference mentioned above, which was included in Deferred Income Tax in the reconciliations to US GAAP presented in note 13. 19 13. RECONCILIATION OF NET INCOME, SHAREHOLDERS' EQUITY AND CASH FLOWS TO US GAAP The following is a summary of the significant adjustments to net income and cash flows for the years ended December 31, 2001 and 2000, and the shareholders' equity as of December 31, 2001 and 2000 which would be required if US GAAP had been applied instead of Argentine GAAP in the Company's financial statements.
2001 2000 ------------ ------------ Net income in accordance with Argentine GAAP 18,253,040 30,428,945 US GAAP adjustments: Well conversion costs 224,775 6,483,035 Depreciation of well conversion costs (883,539) (674,484) Change in estimates of fixed assets depreciation 2,760,835 -- Pension plan obligations 351,747 360,658 Exchange differences from the devaluation of the Argentine peso 2,318,064 -- Deferred income taxes (1,611,895) (2,720,361) ------------ ------------ Net income under US GAAP 21,413,027 33,877,793 ============ ============ Shareholders' equity in accordance with Argentine GAAP 93,447,699 89,594,659 US GAAP adjustments: Well conversion costs 8,664,634 8,439,859 Depreciation of well conversion costs (1,713,492) (829,953) Change in estimates of fixed assets depreciation 2,760,835 -- Pension plan obligations (223,926) (575,673) Exchange differences from the devaluation of the Argentine peso 2,318,064 -- Deferred income taxes (4,575,763) (2,963,868) ------------ ------------ Shareholders' equity under US GAAP 100,678,051 93,665,024 ============ ============ Net funds provided by operations in accordance with Argentine GAAP 27,776,374 38,271,654 US GAAP adjustments: Well conversion costs 224,775 6,483,035 ------------ ------------ Net funds provided by operations under US GAAP 28,001,149 44,754,689 ============ ============ Funds used in investing activities in accordance with Argentine GAAP (21,650,536) (17,461,541) US GAAP adjustments: Well conversion costs (224,775) (6,483,035) ------------ ------------ Funds used in investing activities under US GAAP (21,875,311) (23,944,576) ============ ============
Comprehensive income approximates net income under US GAAP, since no unrealized gain or loss occurred for the years presented. 20 EXHIBIT I PETROLERA PEREZ COMPANC S.A. CHANGES IN FIXED ASSETS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Stated in Argentine pesos -- Note 1.II)
2001 ------------------------------------------------------------------------- ORIGINAL COST ------------------------------------------------------------------------- BEGINNING ENDING MAIN ACCOUNT BALANCES INCREASES DECREASES TRANSFERS BALANCES ------------ ------------ ------------ ------------ ------------ ------------ Automobiles 857,644 158,258 -- -- 1,015,902 Furniture and fixtures 1,192,660 -- -- -- 1,192,660 Computer hardware 1,304,005 84,192 22,962 -- 1,365,235 Facilities 288,626 -- -- -- 288,626 Machinery, receivers and transmitters 384,124 -- -- -- 384,124 Land and buildings 3,142 -- -- -- 3,142 Wells and production installations 157,263,451 -- -- 16,586,357 173,849,808 Construction in process 5,163,808 11,611,664 4,500,634 (10,480,090) 1,794,748 Materials in use and equipment in deposit 1,250,927 5,855,707 -- (6,106,267) 1,000,367 ------------ ------------ ------------ ------------ ------------ Total as of 2001 167,708,387 17,709,821 4,523,596 -- 180,894,612 ============ ============ ============ ============ ============ 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 ============ ============ ============ ============ ============
2001 2000 1999 ---------------------------------------------------------------------------- ---------- ---------- ACCUMULATED DEPRECIATION --------------------------------------------------------------- ANNUAL BEGINNING DEPRECIATION ENDING NET NET NET MAIN ACCOUNT BALANCES INCREASES RATE% DECREASES BALANCES BOOK VALUE BOOK VALUE BOOK VALUE ------------ ---------- ---------- ------------ --------- ---------- ---------- ---------- ---------- Automobiles 564,778 144,205 20 -- 708,983 306,919 292,866 138,565 Furniture and fixtures 1,078,375 109,394 10 -- 1,187,769 4,891 114,285 233,551 Computer hardware 972,700 124,278 33.33 -- 1,096,978 268,257 331,305 177,055 Facilities 288,626 -- 10 -- 288,626 -- -- 24,052 Machinery, receivers and transmitters 214,308 35,965 10 -- 250,273 133,851 169,816 211,430 Land and buildings 1,351 63 2 -- 1,414 1,728 1,791 1,854 Wells and production installations 84,188,020 12,200,919 (a) -- 96,388,939 77,460,869 73,075,431 67,447,201 Construction in process -- -- -- -- -- 1,794,748 5,163,808 4,364,502 Materials in use and equipment in deposit -- -- -- -- -- 1,000,367 1,250,927 1,715,678 ---------- ---------- --------- ---------- ---------- ---------- ---------- Total as of 2001 87,308,158 12,614,824 -- 99,922,982 80,971,630 ========== ========== ========= ========== ========== 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 ========== ========== ========= ========== ==========
(a) Wells and production installations are depreciated under the unit of production method, as explained in Note 1.III.d). 21 EXHIBIT II PETROLERA PEREZ COMPANC S.A. FOREIGN CURRENCY ASSETS AND LIABILITIES AS OF DECEMBER 31, 2001 AND 2000
2000 2001 ---------- ----------------------------------------- TYPE OF FOREIGN FOREIGN EXCHANGE BOOK AMOUNT FOREIGN CURRENCY CURRENCY RATE IN ARGENTINE CURRENCY AMOUNT AMOUNT (NOTE 11) PESOS ---------- ---------- ---------- ---------- ------------ CURRENT ASSETS - Cash US$ 4,124 10,835 1.000 10,835 - Investments US$ 9,414,133 4,435,442(1) 1.000 4,435,442 - Trade receivables: o Related companies US$ 58,083 2,226,766 1.000 2,226,766 o Other customers US$ 8,371,780 2,374,407(2) 1.000 2,374,407 ----------- 9,047,450 ----------- NONCURRENT ASSETS - Investments - Unlisted government debt securities US$ -- 2,019,428 1.000 2,019,428 ----------- TOTAL FOREIGN CURRENCY ASSETS 11,066,878 =========== CURRENT LIABILITIES - Trade payables: o Other vendors US$ 827,863 2,955,786 1.000 2,955,786 o Related companies US$ 316,450 299,213 1.000 299,213 - Loans US$ -- 2,019,897(3) 1.000 2,019,897 - Other liabilities US$ -- 339,416 1.000 339,416 ----------- TOTAL FOREIGN CURRENCY LIABILITIES 5,614,312 ===========
(1) Includes 4,029,316 related to time deposits in foreign banks and 406,126 related to mutual funds in local banks. (2) Includes 1,508,488 for foreign receivables. (3) Related to payables to foreign banks. 22 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, 2001, 2000 AND 1999 (Stated in Argentine pesos - Note 1.II)
1999 2000 2001 ----------- ----------- ------------------------------------------------------------------- OPERATING ADMINISTRATIVE SELLING EXPLORATION MAIN ACCOUNT TOTAL TOTAL TOTAL EXPENSES EXPENSES EXPENSES EXPENSES ------------ ----------- ----------- ----------- ---------- -------------- --------- ----------- Salaries and wages 3,669,350 3,644,174 4,413,014 2,275,642 1,929,223 -- 208,149 Social security taxes 590,133 491,995 447,790 283,296 140,357 -- 24,137 Other benefits to personnel 824,857 1,857,955 1,398,727 574,253 789,974 -- 34,500 Taxes, charges and contributions 81,701 289,798 189,395 1,059 92,763 95,573 -- Directors' and consultants' fees 370,701 822,786 441,852 -- 424,073 17,779 -- Spares and repairs 2,232,776 5,443,750 5,346,997 5,346,997 -- -- -- Freight and haulage 2,796,240 3,134,292 2,889,604 8,999 -- 2,880,605 -- Production services 7,040,024 8,332,931 7,977,116 7,559,996 187,134 229,986 -- General expenses 724,720 616,995 493,017 74,790 363,323 54,904 -- Fixed assets depreciation 7,859,390 8,379,233 12,614,824 12,614,824 -- -- -- Research and development 192,547 627,504 78,830 -- -- -- 78,830 Abandoned exploratory wells and retirement of non-producing assets -- -- 4,500,634 -- -- -- 4,500,634 Royalties 7,182,677 10,659,914 9,634,349 9,634,349 -- -- -- ----------- ----------- ----------- ---------- -------------- --------- ----------- Total as of 2001 50,426,149 38,374,205 3,926,847 3,278,847 4,846,250 =========== ========== ============== ========= =========== 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 =========== ========== ============== ========= ===========
23 EXHIBIT IV PETROLERA PEREZ COMPANC S.A. BREAK DOWN FOR MATURITY OF INVESTMENTS, RECEIVABLES AND LIABILITIES AS OF DECEMBER 31, 2001 (Stated in Argentine pesos -- Note 1.II)
ASSETS LIABILITIES ---------------------------- -------------- OTHER TERM INVESTMENTS RECEIVABLES LIABILITIES(1) ---- ----------- ----------- -------------- WITHOUT MATURITY 455,446 -- 7,500 ----------- ----------- -------------- WITH MATURITY TO EXPIRE: - Up to three months 4,029,316 6,635,901(3) 6,918,501(3) - From three to six months -- 174,371(3) 2,359,313(5) - From two to three years 2,019,428 -- -- - More than three years -- 7,180,978(4) -- ----------- ----------- -------------- TOTAL WITH MATURITY 6,048,744(2) 13,991,250 9,277,814 ----------- ----------- -------------- TOTAL 6,504,190 13,991,250 9,285,314 =========== =========== ==============
(1) Encompasses total liabilities, excluding reserves for contingencies. (2) Accruing interest at an average nominal rate of about 7.2% per annum. (3) Accrues no interest. (4) 98% accrues interest at a fixed rate of about 3% per annum. (5) Includes 2,019,897 accruing interest at a fixed rate of about 5.7% per annum. 24 SIGNATURE Pursuant to the requirements of the 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 ---------------------------------------- President, Chief Operating and Chief Accounting Officer (Duly Authorized Officer of the Registrant) May 29, 2002 25 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------ ----------- (99) - Notification of Pistrelli, Diaz y Associados representatives