10-K/A 1 d07070a1e10vkza.txt AMENDMENT TO FORM 10-K 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 (FEE REQUIRED) For the fiscal year ended December 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ----------- ----------- 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. [ ] Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X] The aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant on June 28, 2002, the last business day of the second quarter 2002, was $45,698,260. This value was calculated based upon the average bid and asked prices of the registrant's stock of $20 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. As of March 1, 2003 there were outstanding 7,360,311 shares of the registrants, ordinary shares outstanding. 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, 2002 for the purpose of filing the financial statements of Petrolera Perez Companc S.A. ("Petrolera"), an Argentine corporation and a significant investee, as required by Rule 3-09 of Regulation S-X. As of December 31, 2002, the Company owned a 39.224 percent stock interest in Petrolera, a partner in the Entre Lomas joint venture and the operator of the concession. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1 Financial Statements filed in this report are set forth in the Index to Consolidated Financial Statements under Item 8. (a) 2 and (d) Separate financial statements and supplementary data of Petrolera, a 50-percent-or-less-owned person are filed as Schedule S-1. The exhibits listed below are filed as part of this annual report.
EXHIBIT NUMBER DESCRIPTION ------ ----------- *(3) - Memorandum of Association of Apco Argentina Inc. as amended August 20, 1980, as filed with Form 10-K of the Company for the fiscal year ended on December 31, 1980, Commission File No. 0-8933 dated April 30, 1981. *(3) - Articles of Association of Apco Argentina Inc. as filed with Form 14(Registration No. 2-6354), dated March 16, 1979. *(10) - Agreement dated April 23, 1981, among the Company and Bridas S.A.P.I.C., with respect to the Acambuco project, Salta province, Argentina, as filed with Form 10-K, No. 0-8933, dated April 14, 1982. *(10) - Agreement dated March 13, 1968, between Perez Companc and YPF for the Exploration, Exploitation and Development of the "Entre Lomas" area, Contract Number 12,507 as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Translation dated November 18, 1970, of agreement dated March 13, 1968, between Perez Companc and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated April 1, 1968, among Apco Oil Corporation, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated February 29, 1972, among the Company, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated March 23, 1977, among the Company, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Contract dated December 1977 amending the March 13, 1968 Agreement between Perez Companc and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Memorandum of Agreement dated August 16, 1979, among the Company, Perez Companc and Petrolera as filed with Form 10-K, No. 0-8933, dated March 28, 1980. *(10) - Agreement dated December 7, 1983, between Petrolera and YPF regarding the delivery of propane and butane from the Entre Lomas area, as filed with Form 10-K, No. 0-8933, dated April 12, 1983. *(10) - CONTRACT FOR THE EXPLORATION, EXPLOITATION AND DEVELOPMENT OF THE "ENTRE LOMAS" AREA, dated July 8, 1982 between Yacimientos Petroliferos Fiscales Sociedad Del Estado and Petrolera Perez Companc, Inc. relating to the extension of Contract No. 12,507, as filed with Form 10-K, No. 0-8933, dated April 12, 1983. *(10) - ADDITIONAL CLAUSE NUMBER 3 dated December 18, 1985, to the agreement between Perez Companc and YPF covering the Entre Lomas area dated March 13, 1968 and attached translation as filed with Form 10-K, No. 0-8933, dated April 11, 1988. *(10) - Agreement between the Joint Committee created by the Ministry of Public Works and Services and the Ministry of Energy, YPF and Petrolera Perez Companc S.A. dated December 26, 1990, constituting the conversion to concession and deregulation of the original Entre Lomas contract number 12,507. **(10) - Share purchase agreement by and among Ms. Maria Carmen Sundblad de Perez Companc, Sudacia S.A. and Apco Argentina Inc. dated October 23, 2002 relating to the purchase by the Company of 27,700 shares of Petrolera Perez Companc S.A. **(10) - Share purchase agreement by and among the shareholders of Fimaipu S.A. and Apco Argentina Inc. dated December 5, 2002 relating to the purchase by the Company of all of the shares of Fimaipu S. A. **(23) - Consent of Independent Reserve Engineer **(24) - Power of attorney together with certified resolution. (99.1) - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Ralph A. Hill, Chief Executive Officer of Apco Argentina Inc. (99.2) - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Landy L. Fullmer, Chief Financial Officer of Apco Argentina Inc.
* Exhibits so marked have been filed with the Securities and Exchange Commission as part of the filing indicated and are incorporated herein by reference. ** Previously filed. (c) REPORTS ON FORM 8-K On November 5, 2002, the Company furnished a report on Form 8-K under Item 9 and furnished as an exhibit a press release announcing the Company's purchase of 27,700 additional shares of Petrolera Perez Companc S.A. from the Perez Companc family. Schedule S-1 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF SUBSIDIARY NOT CONSOLIDATED AND 50 PERCENT OR LESS OWNED PETROLERA PEREZ COMPANC S.A. TABLE OF CONTENTS TO FINANCIAL STATEMENTS CONTENTS PAGE - Report of Independent Auditors - 4 - - Financial statements - Balance sheets as of December 31, 2002 and 2001 - 5 - - Statements of operations for the years ended December 31, 2002, 2001 and 2000 - 6 - - Statements of shareholders' equity for the years ended December 31, 2002, 2001 and 2000 - 7 - - Statements of cash flows for the years ended December 31, 2002, 2001 and 2000 - 8 - - Notes to financial statements - 9 - 3 REPORT OF INDEPENDENT AUDITORS To the Board of Directors of PETROLERA PEREZ COMPANC S.A.: We have audited the accompanying balance sheets of Petrolera Perez Companc S.A. (an Argentine Corporation) as of December 31, 2002 and 2001, and the related statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2002. 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 statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Petrolera Perez Companc S.A. as of December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002, in accordance with accounting principles generally accepted in the United States of America. As explained in Note 3 to the financial statements, effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations". Buenos Aires, Argentina PISTRELLI, HENRY MARTIN Y ASOCIADOS S.R.L. May 2, 2003 (Member Ernst & Young Global) DANIEL G. MINENNA Partner 4 PETROLERA PEREZ COMPANC S.A. BALANCE SHEETS AS OF DECEMBER 31, 2002 AND 2001 (stated in thousands of U.S. dollars)
DECEMBER 31, --------------------------- 2002 2001 -------- -------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,599 $ 4,863 Accounts receivable ($3,512 and $2,310 with related parties, note 7) 5,954 4,824 Other receivables 2,069 1,117 Inventories 975 636 -------- -------- Total current assets 14,597 11,440 -------- -------- NONCURRENT ASSETS Property and equipment, net 90,515 88,565 Other receivables 2,673 4,811 Other assets 839 2,019 -------- -------- Total noncurrent assets 94,027 95,395 -------- -------- TOTAL ASSETS $108,624 $106,835 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities ($276 and $319 with related parties, note 7) $ 2,775 $ 4,565 Short-Term debt - 2,020 Taxes payable, deferred income tax and payroll 10,810 1,921 Other payables 418 489 -------- -------- Total current liabilities 14,003 8,995 -------- -------- NONCURRENT LIABILITIES Deferred income tax 907 2,018 Other liabilities 1,404 262 -------- -------- Total noncurrent liabilities 2,311 2,280 -------- -------- TOTAL LIABILITIES 16,314 11,275 -------- -------- SHAREHOLDERS' EQUITY Paid-in Capital (411,900 ordinary shares and 88,100 preferred shares authorized, issued and outstanding) 2,050 2,050 Legal reserve 305 305 Retained earnings 89,955 93,205 -------- -------- TOTAL SHAREHOLDERS' EQUITY 92,310 95,560 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,624 $106,835 ======== ========
The accompanying notes are an integral part of these financial statements. 6 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (stated in thousands of U.S. dollars)
YEAR ENDED DECEMBER 31, ------------------------------------------------ 2002 2001 2000 ----------- ----------- ----------- REVENUES: Operating revenues ($11,783, $3,927 and $21,020 with related parties, note 7) $ 63,162 $ 82,064 $ 96,207 Direct expenses (4,136) (784) (955) ----------- ----------- ----------- Net operating revenues 59,026 81,280 95,252 ----------- ----------- ----------- COST AND EXPENSES: Operating expenses $1,510, $3,532 and $4,661 with related parties, note 7 (10,036) (18,845) (16,885) Provincial production tax (6,730) (9,634) (10,660) Transportation and storage (995) (2,890) (3,135) Selling and administrative (1,998) (3,704) (4,349) Depreciation of property and equipment (12,815) (10,827) (8,869) Exploration expense (159) (4,846) (926) Interest expense (income) (671) 739 342 Foreign exchange gains (losses) ($841 with related parties in 2002, note 7) (5,171) (2,701) - Other income (expense), net 15 (269) 1,563 ----------- ----------- ----------- Total cost and expenses (38,560) (52,977) (42,919) ----------- ----------- ----------- INCOME BEFORE INCOME TAX AND CUMULATIVE EFFECT OF CHANGE 20,466 28,303 52,333 IN ACCOUNTING PRINCIPLE Income tax (10,220) (10,199) (18,270) ----------- ------------ ----------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING 10,246 18,104 34,063 PRINCIPLE Cumulative effect of change in accounting principle, 3,704 - - net of deferred income tax of 862 thousand ----------- ----------- ----------- NET INCOME $ 13,950 $ 18,104 $ 34,063 =========== =========== =========== Pro forma amounts assuming the change in accounting principle is applied retroactively: Net income $ 10,246 $ 18,723 $ 34,510 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 6 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (stated in thousands of U.S. dollars)
BALANCE CAPITAL LEGAL RETAINED STOCK RESERVE EARNINGS TOTAL -------- --------- --------- --------- DECEMBER 31, 1999 $ 2,050 $ 305 $ 71,290 $ 73,645 - Dividends - - (15,852) (15,852) - Net income - - 34,063 34,063 -------- --------- --------- --------- DECEMBER 31, 2000 2,050 305 89,501 91,856 - Dividends - - (14,400) (14,400) - Net income - - 18,104 18,104 -------- --------- --------- --------- DECEMBER 31, 2001 2,050 305 93,205 95,560 - Dividends - - (17,200) (17,200) - Net income - - 13,950 13,950 -------- --------- --------- --------- DECEMBER 31, 2002 $ 2,050 $ 305 $ 89,955 $ 92,310 ======== ========= ========= =========
The accompanying notes are an integral part of these financial statements. 7 PETROLERA PEREZ COMPANC S.A. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000 (stated in thousands of U.S. dollars)
YEAR ENDED DECEMBER 31, ---------------------------------------- 2002 2001 2000 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 13,950 $ 18,104 $ 34,063 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle (3,704) - - Exploratory wells charged to expense - 4,501 831 Depreciation of property and equipment 12,815 10,827 8,869 Deferred income tax (2,615) (191) 2,720 Changes in assets and liabilities, net: (Increase) decrease in assets: Accounts receivable 72 6,216 (1,968) Due from related parties (1,202) (2,104) 130 Inventories (339) 435 299 Other receivables 1,186 2,842 2,295 Other assets 1,180 (2,019) (7,653) Increase (decrease) in liabilities: Accounts payable and accrued liabilities (1,747) (208) 1,325 Due to related parties (43) (190) (97) Taxes payable and payroll and social security taxes 9,531 (13,886) 5,602 Other liabilities (262) (779) (3,826) ----------- ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 28,822 23,548 42,590 ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (8,866) (17,694) (21,779) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt - 2,020 - Repayment of debt (2,020) - - Dividends paid (17,200) (14,400) (15,852) ----------- ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (19,220) (12,380) (15,852) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 736 (6,526) 4,959 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,863 11,389 6,430 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,599 $ 4,863 $ 11,389 =========== =========== =========== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 52 $ 182 $ 153 Income taxes paid $ 1,976 $ 19,331 $ 11,961
The accompanying notes are an integral part of these financial statements. 8 PETROLERA PEREZ COMPANC S.A. NOTES TO FINANCIAL STATEMENTS (stated in thousands of U.S. dollars, except otherwise indicated) 1. CORPORATE ORGANIZATION Petrolera Perez Companc S.A. is an Argentine Corporation. As of December 31, 2002, 2001 and 2000 the shareholders of the Company and their participations were as follows: 2002 2001 2000 ---------- ---------- --------- Pecom Energia S.A. 19.21% 19.21% 19.21% Apco Argentina Inc. 39.22% 33.68% 33.68% Sudacia S.A. - 4.91% 4.91% Goyaike S.A. - 17.91% 17.91% Perez Companc Family - 22.39% 22.39% Other 1.90% 1.90% 1.90% Petrobras Participacoes, S.L. 39.67% - - ---------- ---------- --------- 100.00% 100.00% 100.00% ========== ========== =========
During October 2002, the Perez Companc Family, Sudacia S.A. and Goyaike S.A. sold their interests in the Company to Petrobras Participacoes, SL (a wholly owned subsidiary of Petroleo Brasileiro S.A. -- Petrobras) and to Apco Argentina Inc. Since Petroleo Brasileiro S.A. - Petrobras also acquired a controlling interest in Pecom Energia S.A., it also owns indirectly a controlling interest in the Company. The Company is operator and participant in Entre Lomas concession (Entre Lomas, an unincorporated joint venture funded in August 12, 1968) located in Rio Negro and Neuquen in southwest Argentina, which is accounted for following the proportional consolidation method. 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 option to extend the concession for an additional ten-year period with the consent of the government. The partners' interests in the Entre Lomas concession as of December 31, 2002, 2001 and 2000 were as follows: Petrolera Perez Companc S.A. (Operator) 73.15% Apco Argentina Inc. Argentine Branch 23.00% Pecom Energia S.A. 3.85% -------- 100.00% ========
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION --------------------- The financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). 9 The company has only one business segment and is engaged exclusively in the oil and gas exploration, development and production in the Entre Lomas joint venture. All of the Company's operating revenues and all of its long-lived assets are in Argentina. Oil and gas operation are high risk in nature. A successful operation requires that a company deal with uncertainties about the subsurface that even a combination of experience, scientific information and careful evaluation cannot always overcome. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company decided in 2002 to use the U.S. dollar as its reporting currency and to present the financial statements as prepared under accounting principles generally accepted in the United States (U.S. GAAP). The Company has used in prior years the Argentine Peso as the reporting currency and has followed the practice of presenting its financial statements as prepared under accounting principles generally accepted in Argentina (AR GAAP), together with a reconciliation of shareholders' equity and net income to US GAAP. Both changes were implemented to align reporting currency and GAAP presentation with those of the parent company. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ CASH AND CASH EQUIVALENTS Cash and cash equivalents include highly liquid bank deposits of $5.4 million and $4.2 million of which $2.9 million and $4 million earned interest ranging from 1.0-1.05 percent and 1.5-2.5 percent in 2002 and 2001, respectively. The Company considers all investments with a maturity at three months or less to be cash equivalents. OTHER RECEIVABLES This account mainly includes tax credits for VAT and Decree Federal Executive Power No. 652/02, prepaid expenses and compulsory saving receivable detailed in note 4. INVENTORIES Includes hydrocarbons and material and spares parts, which were accounted for at the lower of cost or market. OTHER ASSETS Includes unlisted government securities valued until December 31, 2001 at the original value plus interest accrued as of such date. Considering that the Argentine Government declared the default on the payment of most its sovereign debt in 2002, the Company valued these securities as of December 31, 2002, at their net realizable value. PROPERTY AND EQUIPMENT The Company uses the successful-efforts method of accounting for its oil and gas exploration and production activities. Under this 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 exploratory expense of the year. Drilling costs of productive wells and of dry holes drilled for development of oil and gas reserves are capitalized. Asset life retirement obligations are also considered in the Property and Equipment account, as further discussed in Note 3. Oil and gas properties are depreciated over their productive lives using the units of production method, by applying the ratio of oil and gas produced to the proved developed oil and gas reserves. The Company's remaining property and equipment are depreciated by the straight-line method based on their estimated useful lives, resulting in annual rates in range of 10% to 33%. Long-lived assets are reviewed for impairment in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, " Accounting for the Impairment or Disposal of Long-Lived Assets", whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. Due to volatility of oil and gas prices, it is possible that the Company's assumptions regarding oil and gas prices may change in the future. For the years ended December 31, 2002, 2001 and 2000, the Company did not record any impairment charges as the estimated future undiscounted cash flows exceeded the carrying value of its properties. 10 DEBT As of December 31, 2001 includes a loan granted by the Citibank NA for financing of exports which accrued an interest rate of about 5.4% and with maturity in May 2002. FOREIGN CURRENCY TRANSLATION The financial statements have been translated into United States dollars in accordance with SFAS No. 52, Foreign Currency Translation, using the United States dollar as the functional currency. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount reported in the balance sheet for cash equivalents, accounts receivable and accounts payable is equivalent to fair value. Fair Values of other non-current financial instruments are as follows:
December 31, 2002 December 31, 2001 ------------------------ ------------------------ Book Fair Book Fair Value Value Value Value ------- ------- ------- ------- Other receivables $ 2,673 $ 2,343 $ 4,811 $ 4,369 Other liabilities $ 1,404 $ 1,404 $ 262 $ 262
INCOME TAXES Deferred income taxes are computed using the liability method and are provided to reflect the future tax consequences of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. CHANGE IN ACCOUNTING POLICY Effective January 1, 2002, The Company implemented SFAS No. 143 as described in Note 3. REVENUE RECOGNITION The Company recognizes revenues from sales of oil, gas, and plant products at the time the product is delivered to the purchaser and title has passed. Any product produced that has not been delivered is reported as inventory. When cost is calculated, it includes total per unit operating cost and depreciation. Transportation and storage costs are recorded as expenses when incurred. The Company has had no contract imbalances relating to either oil or gas production. DERIVATIVE INSTRUMENTS The Company has historically not used derivatives to hedge price volatility or for other purposes. However, during 2002 an isolated crude oil swap was entered with a related party, which resulting loss as presented in Note 7 has been accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. No outstanding derivative contracts were in effect as of December 31, 2002 and 2001. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS ----------------------------------------- In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Asset. SFAS No. 144 establishes a single accounting model, based on the framework established by SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, for long-lived Assets to be disposed of by sale. The provisions of this Statement are effective for financial statements issued for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The provisions of this statement generally are to be applied prospectively. The Company adopted SFAS No. 144 as of January 1, 2002. Adoption did not have material impact on the Company's financial position or results of operations. 11 In the second quarter 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including certain costs incurred in a restructuring). This statement requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The provisions of the Statement are effective for exit or disposal activities that are initiated after December 31, 2002. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". Interpretation No. 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financials statements. The initial recognition and initial measurement provisions of Interpretation No. 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements in the Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. In the opinion of the Company's management, the adoption of provisions of this rule will not have a material effect on the financial position or result of operations under US GAAP. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of variable interest entities". Interpretation No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. The Interpretation No. 46 also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of Interpretation No. 46 apply immediately to variable interest entities created after January 31, 2003. In the opinion of the Company's management, the adoption of provisions of this rule will not have a material effect on the financial position or result of operations under US GAAP. 3. IMPLEMENTATION OF SFAS 143 During the early 1990's the Argentine Department of Energy and Argentine provinces implemented environmental regulations for Argentina's energy industry including oil and gas operations. Among those regulations were resolutions covering the plugging and abandonment of oil and gas wells. As a result, the Company recognized it would be required to incur future plugging and abandonment costs for wells in the Entre Lomas concession and began to gradually accrue for such future costs. In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. SFAS 143 is required to be adopted by companies for financial statements issued for fiscal years beginning after June 15, 2002, with earlier application encouraged. The Company elected to adopt SFAS 143 effective January 1, 2002. Prior to the adoption of SFAS 143, the Company accrued future abandonment costs of wells and related facilities through its depreciation and amortization calculation, and included the cumulative accrual in accumulated depreciation, depletion and amortization. As part of the adoption of SFAS 143, an engineering analysis was obtained which projects through the last year of the Company's concession terms, the number of wells that would require plugging and abandoning and the estimated cost to abandon a well. After considering inflation and present value factors, the estimated asset retirement obligation as of January 1, 2002 totaled $1,332 ($1,352 on December 31, 2002). The following table presents the estimated asset retirement obligation as if this Statement had been applied during all periods affected. Amounts are in thousands of US dollars and are as of December 31 for each of the years presented.
2002 2001 2000 Asset retirement obligation $ 1,352 $ 1,332 $ 1,245
The above described asset retirement obligation is based on estimates of the number of wells expected to be abandoned in the last year of the Company's concession terms, and an estimated cost to plug and abandon a well as discussed with field service companies that would be expected to perform such services. Both estimates were provided by operations engineers and are considered to be the best estimates that can be derived today based on present information. Such estimates are, however, subject to significant change as time passes. Given the uncertainty inherent in the process of estimating future oil and gas reserves and future oil and gas production streams, the estimate of the number of future wells to be plugged and abandoned could change as new information is obtained. Furthermore, given the current economic situation in Argentina and uncertainties associated with future levels of inflation in the country and devaluation of the peso, any future estimate of the cost to plug and abandon a well is subject to a wide range of outcomes as the estimate is updated as time passes. Finally, adjustments in the total asset retirement obligation included in the Company's balance sheets will take into consideration future estimates of inflation and present value factors based on the Company's credit standing. Given the current economic situation in Argentina, future inflation rates and interest rates, upon which present value factors are based, as recent history demonstrates, may be subject to large variations over short periods of time. 12 As the amount accrued by the Company prior to adoption of SFAS 143 was in excess of the amount required under the provisions of SFAS 143, implementation of the standard has resulted in an increase to net income of $3,704, which is classified as a cumulative effect of change in accounting principle. The effect of adoption on operating expenses in 2002 is immaterial. 4. TAX DISPUTES In 1988, the Argentine government amended the Obligatory Savings Law requiring that all taxpayers deposit with the government, both in 1988 and 1989, amounts computed on the basis of prior year taxable incomes. It was the opinion of the Entre Lomas joint venture partners and the Company's legal and tax counsel that it was exempt from these deposits due to the tax exemption granted in the original Entre Lomas contract number 12,507. As a result the deposits were not made. In August 1993, the Direccion General Impositiva ("DGI"), the Argentine taxing authority, made a claim against the Company for the delinquent deposits pertaining to the Entre Lomas operation, which including interest and indexation for inflation, amounted to $9.2 million pesos. After a lengthy judicial process that lasted seven years and included various appeals, in May 2000, the Argentine Supreme Court ruled in favor of the DGI and against Petrolera Perez Companc S.A. As a result, the Entre Lomas Joint Venture partners paid the $9.2 million peso obligatory savings deposit. The Obligatory Savings Law provides that taxpayers are entitled to receive a full refund of the deposit in pesos, plus interest based on Argentina's national savings rate, sixty months from the date of making the deposit. The devaluation of the peso has resulted in a substantial loss in the dollar value of this peso denominated deposit. At the exchange rate of 1 ARS to 1 USD that was in effect at the time the deposit was made, the original dollar value of the Company's percent share of the deposit was $6.7 million. At the balance sheet date of December 31, 2002, the dollar value of the Company's percent share of the deposit is now $2.1 million. The deposit is presented in the balance sheet within other receivables. 5. INCOME TAX The Company accounts for income taxes under the liability method in accordance with SFAS No. 109 "Accounting for income taxes". Under this method, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at each year-end. The provision for income taxes before cumulative effect of change in accounting principle is comprised of:
FOR THE YEARS ENDED ---------------------------------------------------- 2002 2001 2000 ----------- ----------- ------------ Current expense $ (12,835) $ (10,390) $ (15,550) Deferred benefit (expense) 2,615 191 (2,720) ----------- ----------- ------------ $ (10,220) $ (10,199) $ (18,270) =========== =========== ============
Reconciliation of the tax provision to taxes calculated based on the statutory tax rates is as follows:
FOR THE YEARS ENDED ---------------------------------------------------- 2002 2001 2000 ----------- ----------- ------------ Pre-tax income before cumulative effect of change in accounting principle $ 20,466 $ 28,303 $ 52,333 Statutory tax rate 35% 35% 35% ----------- ----------- ------------ Tax provision $ 7,163 $ 9,906 $ 18,317 US translation effect 3,125 - - Tax adjustments and other (68) 293 (47) ----------- ----------- ------------ Income tax provision $ 10,220 $ 10,199 $ 18,270 =========== =========== ============
13 The deferred tax liabilities at December 31, 2002 and 2001 are as follows:
2002 2001 ----------- ----------- DEFERRED TAX ASSETS Defined Benefit Pension Plan $ 53 $ 47 Other liabilities 473 50 Debt - 300 Other, net 28 74 ----------- ----------- TOTAL DEFERRED ASSETS $ 554 $ 471 ----------- ----------- DEFERRED TAX LIABILITIES Accounts receivable $ - $ (251) Investments - (590) Property and equipment (1,575) (2,404) ----------- ----------- TOTAL DEFERRED TAX LIABILITIES (1,575) (3,245) ----------- ----------- NET DEFERRED INCOME TAX LIABILITY $ (1,021) $ (2,774) =========== =========== Current deferred income tax liability (114) (756) Noncurrent deferred income tax liability (907) (2,018) ----------- ----------- NET DEFERRED INCOME TAX LIABILITY $ (1,021) $ (2,774) =========== ===========
6. PROPERTY AND EQUIPMENT The capitalized cost of property and equipment and the related accumulated depreciation as of December 31, 2002 and 2001 is as follows:
DECEMBER 31, -------------------------------- 2002 2001 ---------- ---------- Wells and other oil and gas field equipment $ 190,958 $ 180,396 Other property and equipment 5,905 7,045 ---------- ---------- 196,863 187,441 Less accumulated depreciation (106,348) (98,876) ---------- ---------- Total $ 90,515 $ 88,565 ========== ==========
14 7. RELATED PARTY TRANSACTIONS As of December 31, 2002 and 2001, the balances from related parties were as follows:
AS OF DECEMBER 31, ---------------------------- ACCOUNTS RECEIVABLE 2002 2001 -------- -------- EG3 S.A. $ 3,191 $ - Pecom Energia S.A. 321 2,310 -------- -------- $ 3,512 $ 2,310 ======== ======== ACCOUNTS PAYABLE Pecom Energia S.A. $ 170 $ 123 Oleoductos del Valle S.A. 106 196 -------- -------- $ 276 $ 319 ======== ========
For the years ended December 31, 2002, 2001 and 2000, revenues and expenses derived from related parties transactions were as follows:
2002 2001 2000 --------- -------- ---------- REVENUES FROM HYDROCARBONS SOLD Pecom Energia S.A. $ 5,045 $ 3,927 $ 21,020 EG3 S.A. 4,597 - - Petroleo Brasileiro S.A. -- Petrobras 2,141 - - --------- -------- ---------- $ 11,783 $ 3,927 $ 21,020 ========= ======== ========== EXPENSES Pecom Energia S.A. $ 354 $ 968 $ 2,163 Oleoductos del Valle S.A. 1,150 2,557 2,490 Petroleum Commercial Supply Inc. 6 7 8 --------- -------- ---------- $ 1,510 $ 3,532 $ 4,661 ========= ======== ========== LOSS ON CRUDE OIL SWAP DERIVATIVES Williams Energy Marketing & Trading $ 841 $ - $ - ========= ======== ==========
Director's Compensation totaled $339, $339 and $406, during the years ended December 31, 2002, 2001, and 2000. Balances and results of operations disclosed above with Petrobras and EG3 (a wholly-owned subsidiary of Petrobras) are those corresponding for periods subsequent to October 2002, as from Petrobras and subsidiaries became related parties, as detailed in Note 1. 15 8. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK MAJOR CUSTOMERS Sales to customers with greater than ten percent of total operating revenues consist of the following:
% FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------- 2002 2001 2000 ---- ---- ---- EG3 S.A. 34.7 * * Petroleo Brasileiro S.A. - Petrobras 29.5 47.8 47.1 ENAP S.A. 14.3 * * Shell C.A.P.S.A. * 21.1 17.6 Pecom Energia S.A. * * 21.8
* Less than 10 percent Management believes that the credit risk imposed by this concentration is offset by the creditworthiness of the Company's customer base and that upon expiration, the oil sales contracts of these customers will be extended or replaced. 9. DEFINED BENEFIT PENSION PLAN The Company sponsors a defined benefit pension plan which covers all employees in payroll as of May 31, 1995. The objective of the plan is to supplement the national social security pension benefits of the employees of The Company. The plan requires from the Company a contribution to a fund, while no contribution is required from employees. The plan was amended in 1999, resulting in an increase of benefits to the employees. According with the provisions of SFAS 87 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.
PENSION BENEFITS -------------------------- 2002 2001 ----- ----- Benefit obligation at year end $2,555 $2,718 Fair Value of Plan Assets at year end $2,451 $2,827 Funded Status on the plan (Underfunded) $ (104) $ 109 Prepaid (accrued) benefit cost $ 77 $ (99)
16
2002 2001 ---- ---- WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31 Discount rate 4.0% 4.0% Expected return on plan assets 4.0% 4.0% Rate of compensation increase: up to 35 years of age 5.0% 5.0% from 36 up to 49 years of age 1.5% 1.5% from 50 years of age - - Benefit cost 52 267 Employer contributions - 658 Employee contributions - - Benefit paid 48 199
10. RESTRICTIONS ON RETAINED 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. Retained earnings available for dividends under Argentine GAAP, in Argentine pesos, translated into US dollars at the exchange rate as of December 31, 2002 are $60,188 thousands. 11. ECONOMIC SITUATION IN ARGENTINA Argentina is under a serious economic situation that is mainly characterized by the high foreign debt level, the declaration of the payment default of most of the Argentine foreign debt, a financial system in crisis, a country risk that reached unprecedented international levels and an economic recession of more than four years. This situation generated a significant reduction in products and services demand and a significant unemployment increase. In addition, the Government's ability to meet its obligations and the possibility to access foreign financing have been affected by these circumstances. Since 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 and other authorized transactions subject, in some cases, to the previous authorization of the Central Bank of Argentina ("BCRA"). 17 The obligation was established to deposit with Argentine banks foreign currency arising from exports, as long as no prior exemption mechanisms were in place. In this regard, Executive Decree No. 1589/89 establishes that producers with free availability of crude oil, natural gas and/or liquefied gases under the terms of Law No. 17,319 and supplementary executive orders, and producers who agree so in the future, shall have the free availability of the percentage of funds established by the bids and/or renegotiations, or provided in the respective agreements, in which case they shall not be required to pay and settle the funds related to that percentage. In all cases, the freely available maximum percentage of funds shall not exceed 70% of each transaction. The concession contract provides the Entre Lomas Joint venture's partners free availability of the 70% of the funds arising from exports. No assurance can be given whether the government will not amend the above mentioned system in the future. 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. Other regulations were issued, the main aspects of which, as of the approval date of these financial statements are summarized below: a) amendment of the charter of the BCRA, authorizing it the issuance of money in excess of the foreign currency reserves, the granting of short-term loans to the federal government and to provide financial assistance to financial institutions with liquidity or solvency problems; b) establishment of an "official" exchange system, mainly for exports, certain imports, and bank loans, and a "freely floating" exchange market for the rest of the transactions. The "official" exchange rate was fixed at ARS. 1.40 to US 1, and the "freely floating" exchange rate as of the close of business of the first day the exchange market reopened, ranged from ARS 1.60 to ARS 1.70 to US 1 (selling rate). In order to maintain the Argentine peso exchange rate, on several occasions the BCRA became involved through the sale of reserves in US dollars. On February 3, 2002, the Federal Executive announced the elimination of the double-tier exchange rate system and replacement of the latter with a floating exchange rate for all the transactions. As of December 31, 2002, the exchange rate was USD1 = ARS 3.37; c) de-dollarization of US dollar-denominated deposits with Argentine financial institutions at the ARS 1.40 to USD 1 exchange rate, and of all US dollar-denominated obligations assumed in Argentina as of January 6, 2002, at the ARS 1 to USD 1. Deposits and certain loans 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 February 3, 2002, plus a minimum interest rate for deposits with the financial system and a maximum interest rate for loans granted by such system, both rates set by the BCRA; d) bank deposits were rescheduled to be reimbursed in installments, fixing amounts and due dates based on amounts booked. Afterwards, the owners of deposits in U.S. dollars were entitled to convert such deposits, in part or in full, into bonds denominated in U.S. dollars and with a 10-year maturity term, or bonds denominated in pesos with a three or five-year maturity term, or bills with a specific term; e) the continuity of restrictions on the funds deposited with financial institutions before December 3, 2001. The deposits made after that date as well as foreign transfers received after such date will be freely available and they may be withdrawn in the currency originally agreed upon; f) de-dollarization of all private agreements entered into as of January 6, 2002, at the ARS 1 to USD 1 exchange rate, and subsequent adjustment thereof by the benchmark stabilization coefficient under the same conditions indicated in (c) above; if the service turned expensive and the parties failed to reach an agreement, Justice may be requested to establish a fair value. The obligations generated after such law will not be subject to adjustment clauses; g) the conversion into Argentine pesos and elimination of indexation clauses regarding public service rates, fixing those rates in pesos at the ARS 1 = USD 1 exchange rate. 18 h) prior BCRA authorization to make transfers abroad on account of financial loan services except those granted by international organizations or governmental credit agencies, and dividend distributions, regardless of the payment method (such payments may be made with freely-available abroad funds). However, this requirement is not applicable to financing granted after to February 11, 2002. In December 2002, the B.C.R.A. began to reduce certain restrictions; thus, the previous authorization for the payment of interest was no longer necessary. In addition, under certain circumstances, the previous authorization for some principal payments was not required either. In January 2003, those institutions entitled to carry out foreign exchange transactions were authorized to make profit and dividend payments abroad with respect to closed financial statements certified by external auditors. i) implementation of taxes on oil and gas exports and certain oil by-products. The Argentine Government levied 20% export taxes on crude oil exports and 5% taxes on the export of some oil derivatives, effective since March 1, 2002 and for five years. These export taxes began to be levied on the Company's products shipped as from April 1, 2002. Towards the end of 2002, the Argentine Government implemented different measures aimed at unblocking the economy and abrogating certain restrictions to gradually normalize the foreign exchange market and the commercial and financial flow of foreign currency. In this regard, among other measures, the restrictions on the free availability of funds deposited in demand accounts were eliminated, the restrictions on principal and interest payment regarding payables to foreign creditors and those on the payment terms of imports and exports of capital goods were reduced, the access of individuals and legal persons to the foreign exchange market was extended, and the withdrawal of foreign currencies to pay dividends was authorized. These financial statements comprise the effects deriving from the new political, economic and foreign exchange regulations known as of their date of issuance. All the Company's Management estimations have been made considering such policies. The impact deriving from the additional measures to be implemented by Government and from putting those previously adopted in practice shall be booked once the Company's Management becomes aware of them. 19 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 Officer, General Manager, Controller and Chief Accounting Officer (Duly Authorized Officer of the Registrant) June 30, 2003 20 CERTIFICATIONS I, Ralph A. Hill, Chief Executive Officer of Apco Argentina Inc., certify that: 1. I have reviewed this annual report on Form 10-K/A of Apco Argentina Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 30, 2003 /s/ Ralph A. Hill --------------------------- Ralph A. Hill Chief Executive Officer 21 I, Landy L. Fullmer, Chief Financial Officer of Apco Argentina Inc., certify that: 1. I have reviewed this annual report on Form 10-K/A of Apco Argentina Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 30, 2003 /s/ Landy L. Fulmer ------------------------------ Landy L. Fullmer Chief Financial Officer 22 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------ ----------- *(3) - Memorandum of Association of Apco Argentina Inc. as amended August 20,1980, as filed with Form 10-K of the Company for the fiscal year ended on December 31, 1980, Commission File No. 0-8933 dated April 30, 1981. *(3) - Articles of Association of Apco Argentina Inc. as filed with Form 14(Registration No. 2-6354), dated March 16, 1979. *(10) - Agreement dated April 23, 1981, among the Company and Bridas S.A.P.I.C., with respect to the Acambuco project, Salta province, Argentina, as filed with Form 10-K, No. 0-8933, dated April 14, 1982. *(10) - Agreement dated March 13, 1968, between Perez Companc and YPF for the Exploration, Exploitation and Development of the "Entre Lomas" area, Contract Number 12,507 as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Translation dated November 18, 1970, of agreement dated March 13, 1968, between Perez Companc and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated April 1, 1968, among Apco Oil Corporation, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated February 29, 1972, among the Company, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated March 23, 1977, among the Company, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Contract dated December 1977 amending the March 13, 1968 Agreement between Perez Companc and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Memorandum of Agreement dated August 16, 1979, among the Company, Perez Companc and Petrolera as filed with Form 10-K, No. 0-8933, dated March 28, 1980. *(10) - Agreement dated December 7, 1983, between Petrolera and YPF regarding the delivery of propane and butane from the Entre Lomas area, as filed with Form 10-K, No. 0-8933, dated April 12, 1983. *(10) - CONTRACT FOR THE EXPLORATION, EXPLOITATION AND DEVELOPMENT OF THE "ENTRE LOMAS" AREA, dated July 8, 1982 between Yacimientos Petroliferos Fiscales Sociedad Del Estado and Petrolera Perez Companc, Inc. relating to the extension of Contract No. 12,507, as filed with Form 10-K, No. 0-8933, dated April 12, 1983. *(10) - ADDITIONAL CLAUSE NUMBER 3 dated December 18, 1985, to the agreement between Perez Companc and YPF covering the Entre Lomas area dated March 13, 1968 and attached translation as filed with Form 10-K, No. 0-8933, dated April 11, 1988. *(10) - Agreement between the Joint Committee created by the Ministry of Public Works and Services and the Ministry of Energy, YPF and Petrolera Perez Companc S.A. dated December 26, 1990, constituting the conversion to concession and deregulation of the original Entre Lomas contract number 12,507. **(10) - Share purchase agreement by and among Ms. Maria Carmen Sundblad de Perez Companc, Sudacia S.A. and Apco Argentina Inc. dated October 23, 2002 relating to the purchase by the Company of 27,700 shares of Petrolera Perez Companc S.A. **(10) - Share purchase agreement by and among the shareholders of Fimaipu S.A. and Apco Argentina Inc. dated December 5, 2002 relating to the purchase by the Company of all of the shares of Fimaipu S.A. **(23) - Consent of Independent Reserve Engineer **(24) - Power of attorney together with certified resolution. * Exhibits so marked have been filed with the Securities and Exchange Commission as part of the filing indicated and are incorporated herein by reference. ** Previously filed. (99.1) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Ralph A. Hill, Chief Executive Officer of Apco Argentina Inc. (99.2) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Landy L. Fullmer, Chief Financial Officer of Apco Argentina Inc.