-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O6BqSvI9rplOFoHgc3GCuG+Dtqbv4pf2Yf0jnYWxXq80UTS2TgE8WPR1XXQEGjpg V3qzxGSzALFM1txQkA+0Dg== 0000950134-97-002280.txt : 19970328 0000950134-97-002280.hdr.sgml : 19970328 ACCESSION NUMBER: 0000950134-97-002280 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: APCO ARGENTINA INC/NEW CENTRAL INDEX KEY: 0000311471 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 742041263 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-08933 FILM NUMBER: 97564751 BUSINESS ADDRESS: STREET 1: P O BOX 2400 CITY: TULSA STATE: OK ZIP: 74102 BUSINESS PHONE: 9185882164 MAIL ADDRESS: STREET 1: P O BOX 2400 STREET 2: MD 47-17 CITY: TULSA STATE: OK ZIP: 74102 10-K405 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1996 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1996 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 (I.R.S. Employer incorporation or organization) Identification No.) P. O. BOX 2400 TULSA, OKLAHOMA 74102 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (918) 588-2164 Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED None None Securities registered pursuant to Section 12(g) of the Act: ORDINARY SHARES $.01 PAR VALUE (TITLE OF CLASS) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant on March 19, 1997, was $50,788,269. This value was calculated based upon the average bid and asked prices of the registrant's stock of $21.00 on March 19, 1997, 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 19, 1997 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: 2 P A R T I ITEM I. BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS Apco Argentina Inc. is a Cayman Islands corporation which was organized April 6, 1979 as a successor to Apco Argentina Inc., a Delaware corporation organized July 1, 1970. The principal business of the Company is its 47.6 percent participation in a joint venture engaged in the exploration, production, and development of oil and gas in the Entre Lomas concession located in southern Argentina. The Company also owns a 1.5 percent participation in the Acambuco joint venture, an oil and gas exploration and development project located in northwest Argentina. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS None. (c) NARRATIVE DESCRIPTION OF BUSINESS ENTRE LOMAS The Company participates in a joint venture with Petrolera Perez Companc S.A. ("Petrolera") and Perez Companc S.A. Both partners are Argentine companies. The purpose of the joint venture is the exploration and development of the Entre Lomas oil and gas concession in the provinces of Rio Negro and Neuquen in southern Argentina. The Company's interest in the joint venture totals 47.6 percent of which 23 percent is a direct participation and 24.6 percent is owned indirectly by virtue of the Company's 33.6 percent stock ownership in Petrolera, the operator of the joint venture. Petrolera owns a 73.15 percent direct interest in the joint venture. YPF CONTRACTS In 1967, Yacimientos Petroliferos Fiscales ("YPF"), the then national oil company of Argentina, sought bids for the development of the Entre Lomas area. Perez Companc won the bid and entered into contract 12,507, dated March 13, 1968, which contract permitted the Entre Lomas joint venture to explore for, develop, and produce oil in the area. Similar contracts with YPF with respect to natural gas produced and liquids extracted from natural gas were entered into on November 18, 1970, and February 10, 1977, respectively. Originally, the joint venture's interests in the Entre Lomas area were derived from such contracts and not from direct ownership of the mineral resources involved. Under existing Argentine hydrocarbon laws, the Argentine government retains ownership of the minerals in place. -2- 3 JOINT VENTURE AGREEMENTS On April 1, 1968, Perez Companc and Petrolera entered into a joint venture agreement with Apco Oil Corporation pursuant to which Petrolera became operator of the Entre Lomas area. On July 1, 1970, Apco Oil Corporation transferred its interest in the Entre Lomas area to Apco Argentina Inc. Similar joint venture agreements among the Company, Perez Companc and Petrolera for the development of natural gas and extraction of propane and butane were entered into February 29, 1972, and March 23, 1977, respectively. DEREGULATION On November 8, 1989, the Argentine government issued decree 1212/89 describing steps necessary to deregulate hydrocarbon production from existing production and development contracts, including Entre Lomas. The decree directed YPF to negotiate with producers the conversion of contracts to the concession or association system described in the 1967 Hydrocarbon Law 17,319, and gave owners of the converted contracts the right to freely dispose of their share of hydrocarbons produced at world prices. Complete deregulation of the Entre Lomas area was implemented by an agreement that went into effect January 22, 1991, amended in February 1994. Pursuant to the agreement, Entre Lomas was converted to a concession giving the joint venture partners ownership of produced hydrocarbons at the wellhead and enabling them to sell oil and gas in internal and external markets. The joint venturers became responsible for payment of provincial royalties and costs of transportation, treatment, and storage of produced oil. YPF paid the partners $8.7 million as compensation for cumulative unrecovered investments as of February 1994. Finally, the life of the concession, which was to expire in the year 2003 under contract 12,507, was extended through 2015, with an option to the joint venture partners to extend the concession term for an additional ten years. SALE OF OIL The Entre Lomas concession is currently participating in several contracts negotiated by the Perez Companc group. This arrangement allows the joint venturers to pool Entre Lomas oil with other concessions in the Medanito area providing greater negotiation strength with Argentine refiners and export customers. Fifteen percent of oil sold in 1996 was exported to Petrobras, the Brazilian national oil company. The remainder was sold to Refineria San Lorenzo S.A. under three one year contracts expiring on different dates in 1997. The per barrel price for Argentine oil continues to be based on the spot market price of West Texas Intermediate crude less a discount to provide for differences in gravity and quality. This discount has been declining steadily since Argentina's oil industry was deregulated. The average weighted discount in effect for current sales contracts is $1.32 as compared with $1.60 for contracts in effect in 1995, and $2.18 for contracts in effect in 1994. -3- 4 As described, all existing contracts expire at different times in 1997. Excellent demand exists for Medanito area crude oil because of its relative quality and favored geographical location. Management is confident that upon expiration, these contracts can be extended or replaced. SALE OF GAS In March 1994, the Entre Lomas joint venturers entered into a gas sales agreement with Litoral Gas S.A., the gas distribution company for the province of Santa Fe. Under the agreement, the joint venturers provide 28 million cubic feet of gas per day during peak winter months and 25 million cubic feet per day during the remainder of the year. The price paid by the purchaser varies depending on seasonal demand. During 1996, 26 million cubic feet per day were sold under this contract at an average price of $1.29 per thousand cubic feet ("mcf"). Prices are scheduled to escalate gradually to an average of $1.34 per mcf during the final year. Provisions exist to adjust the contract price should it diverge too much from the average sale price of gas produced in the Neuquen basin. The term of the contract is five years. As described on page 7, under "Entre Lomas Fields", the Entre Lomas joint venture partners are currently developing a new gas field in the central part of the concession. Production from this field commenced in July 1994. To date, the joint venturers, through a temporary arrangement, have been successful in selling this additional gas stream to Metrogas S.A. Spot market sales to other local distribution companies have also occurred during periods of peak gas demand. In 1996, sales of gas to Metrogas and others, averaged 23 million cubic feet per day at a price of $1.38 per mcf. TRANSPORTATION Oil produced in the Entre Lomas concession is sold in Puerto Rosales and is shipped through the Oleoductos de Valle S.A. ("Oldelval") pipeline system. From the concession, oil is transported through the joint venture's 8 inch, 6 3/4 mile pipeline. This line has a capacity of 16,000 barrels per day and is directly connected to the Medanito-Allen leg of the system. Medanito-Allen, with a daily capacity of 130,000 barrels, transports oil to Allen terminal. Two Oldelval lines, originating in Allen, with a daily capacity of 175,000 barrels, complete the journey to Puerto Rosales. Currently, the Entre Lomas joint venture's allocation in this pipeline system is 11,600 barrels per day. The system at this time is operating at 95 percent of capacity. The cost to transport oil through this system and use the storage and handling facilities in Puerto Rosales averaged $1.11 per barrel in 1996. Current transportation tariffs were established by government decree in 1992. -4- 5 PETROLERA Petrolera was established for the express purpose of carrying out production and development operations in the Entre Lomas area. Major investment and distribution decisions are made by the joint venture and implemented by Petrolera. Petrolera has a board of 15 directors, 7 of whom are nominees of the Company and 8 of whom are nominees of Perez Companc or its affiliates. Petrolera's senior officers are generally the same as those of Perez Companc with other general office and field personnel being employed exclusively by Petrolera. The Company understands that Petrolera's sole business at present is its role as joint venture operator. With the assistance of its branch office in Buenos Aires, the Company obtains operational and financial data with which it monitors joint venture operations. The branch also provides technical assistance to Petrolera and makes recommendations regarding field operations. DISTRIBUTIONS AND DIVIDENDS During 1996, the Company received direct distributions of $6.1 million and Petrolera dividends of $3.7 million. Future distributions will be dependent on the joint venture's ability to generate future profits and the level and timing of future investments in the area. Pursuant to a joint venture agreement dated January 31, 1986, whenever, during a two-month period, cash available to the joint venture exceeds its requirements and commitments, such excess shall be distributed, as soon as practicable, to the joint venturers. OIL AND GAS INFORMATION The Entre Lomas concession is located about 950 miles southwest of the city of Buenos Aires on the eastern slopes of the Andes mountains. It straddles the provinces of Rio Negro and Neuquen approximately 100 kilometers north of the city of Neuquen. The concession produces oil and gas primarily from the Charco Bayo/Piedras Blancas field complex ("CB/PB"). Two smaller fields, the Entre Lomas and El Caracol fields, located to the northwest of the main field complex also produce oil and gas. The largest oil producing formation is called Tordillo which in the CB/PB field has generated 85% of all oil produced in the concession. The Tordillo also produces associated gas which is consumed for field operations. Propane and butane are extracted from this gas in the joint venture's gas processing plant. Other important formations are the Quintuco, which produces gas in CB/PB and oil in the Entre Lomas and El Caracol fields. Since inception 406 wells have been drilled in the concession, of which at year end, 278 are oil wells, 20 are gas wells and 88 are water injection wells. Reference is made to page 12 which presents this information in tabular form. The CB/PB and El Caracol fields are secondary recovery projects. Water injection has been introduced in CB/PB in phases since 1975. There still exist areas in CB/PB which lack injection. The El Caracol field has been under injection since 1989. -5- 6 CHARCO BAYO/PIEDRAS BLANCAS FIELD CB/PB produces principally from the Tordillo formation with some minor production from the Petrolifera formation. Production in the CB/PB field commenced in 1968, with the largest part of this complex developed before 1974. Additional development drilling has continued through the present with two significant drilling campaigns occurring during 1979-1981 and 1986-1988. These two campaigns were the result of renegotiations of the original Entre Lomas contract. Secondary recovery was introduced with a successful pilot in 1975 and has slowly been expanded to include 72 injection wells. CB/PB can best be described as a mature oil field with remaining potential. Development of this field has historically been gradual due to the sporadic nature of past major investment programs which, until the Entre Lomas area was converted to a concession, occurred as a result of major renegotiations of the original contract. The field's ultimate development is likely to result from a combination of expansion of secondary recovery throughout the entire producing field, selective infill drilling, continued step out drilling, and recompletion of existing wells with behind pipe reserves. The results of these programs can be enhanced, and higher percentage recoveries achieved, by improving the efficiency of the waterflood through various means. Such means include substantially increasing the rate of water injection in areas of the field already under flood, modifying existing patterns of injection, increasing lift capacity to handle greater volumes of fluid by accelerating the conversion of wells from gas lift to pump, placing idle wells back on production, and attempting to reduce the effects of channeling of injection water. Although the CB/PB waterflood has been in operation since 1975, there has been insufficient water injected in some areas of the field already under injection and other areas in which there has not been injection to date. As a result, recoveries normally attributed to waterfloods after 15 to 20 years have not been attained and it is currently estimated that this field has a remaining productive life in excess of twenty years. Expansion and improvement of secondary recovery throughout this field is a primary emphasis for the joint venture. Insofar as future drilling activity in the CB/PB field, it is felt that the oil/water contact, or the lowest structural point at which oil can be produced, is fairly well defined. Nevertheless, there remain undrilled step out locations in the flanks of the structure and selective infill locations which should be drilled in order to produce from areas of the field not currently drained by existing wells. The level of development drilling activity in CB/PB will, of course, be dependent on an oil price level that provides adequate returns for the joint venture partners. In the CB/PB field, the Quintuco formation is gas productive. Approximately 30 percent of gas sold by the joint venture is produced from a few gas wells interspersed among the many Tordillo oil wells located on this structure. Quintuco gas reserves in this field are believed to be fully developed. EL CARACOL FIELD The El Caracol field is located in the northwestern most part of the concession. This field produces oil from the Quintuco formation. Thirty one -6- 7 wells have been drilled here to date. Additional development drilling potential may still exist. Water injection began here in 1989 and response has been favorable. ENTRE LOMAS FIELDS The Entre Lomas structure is located in the central part of the concession in the northwest of CB/PB. This anticline is cut by a fault near its crest. An oil field exists on the southwest of upthrown side of this fault and a gas field exists on the northeast/downthrown side. OIL RESERVOIRS The oil field is productive from the Quintuco formation, with some minor production from the Tordillo formation. Quintuco continues to demonstrate development potential toward the northwest. During the year and in early 1997, four wells drilled in this region contained a seam of conglomerate within the Quintuco with improved petrophysical qualities that make these wells more productive than previously drilled wells. Results of these four wells have been largely responsible for raising daily oil production in the concession from approximately 9,000 barrels in early 1996 to greater than 11,000 barrels today. Development drilling to determine the extent of Quintuco production to the west and northwest will continue during 1997. Late in 1995, a Quintuco development well drilled to the lower Tordillo formation generated interest with excellent initial oil production. However, volumes declined rapidly and by mid-1996 the well was converted to Quintuco production. Test results from the four wells described in the preceding paragraph have also found Tordillo capable of production. The southeast, or older part of this field is showing signs of pressure depletion and is a candidate for secondary recovery. The Quintuco formation responded favorably to water flooding in the El Caracol field. Reservoir stimulation studies which attempt to predict the reaction of this field to water injection have been completed successfully. Investments to implement secondary recovery in this field will commence in 1997. GAS RESERVOIRS In 1970, a well known as the Entre Lomas 4 ("EL 4") was drilled and discovered what appeared to be significant gas potential from several sections of the Petrolifera formation. Another well drilled early in the life of the concession, which is a significant distance from EL 4 but is on the same side of the main fault, was drilled and also found the Petrolifera to be gas productive. EL 4 was never produced due to its remote location and lack of market. In 1989, this well experienced casing problems and is believed, over a period of months, to have lost an unknown quantity of gas before repairs could be carried out. Deregulation of Argentina's gas industry in 1993 fueled considerable interest in gas development throughout the country. As a result, in mid 1994, the EL 4 was placed on production at an initial rate of 8 million cubic feet per day. The decision was made to drill step out wells and determine the extent of Petrolifera development in this sector of the concession. During the last three years, six wells have been drilled, of which five are productive. The only non-productive -7- 8 well found the northeast limits of the field. Based on the behavior of the reservoir during 1996 and evaluations performed, it appears that drilling to date may have defined the limits of this new field. However additional wells to investigate further development of the Petrolifera formation to the northwest will be drilled in 1997 and 1998. PROVED RESERVES The following tables summarize, for each of the years presented, significant changes in the quantities of proved oil and gas reserves through the term of the concession assuming exercise of the option to extend the term through 2025. Entre Lomas Joint Venture Summaries of Net Proved Reserves (Applicable to the Company's Interest)
Total proved oil, condensate and (Millions of Barrels) plant product reserves 1996 1995 1994 ------ ------ ------ Beginning of year 37.4 39.5 23.5 Revisions of previous estimates (1.7) (0.7) 17.6 Additions 0.8 0.4 0.2 Acquisitions -- -- -- Production (1.8) (1.8) (1.8) ------ ------ ------ End of Year 34.7 37.4 39.5 ====== ====== ====== Proved developed oil reserves 24.2 25.1 25.5 ====== ====== ======
Total proved gas reserves (Billions of cubic feet) -------------------------- 1996 1995 1994 ------ ------ ------ Beginning of year 53.5 33.8 25.6 Revisions of previous estimates 1.7 (1.6) (0.7) Additions -- 27.1 14.5 Production (8.4) (5.8) (5.6) ------ ------ ------ End of Year 46.8 53.5 33.8 ====== ====== ====== Proved developed gas reserves 44.3 47.8 32.5 ====== ====== ======
There were no estimates of total proved net oil or gas reserves filed with any other United States Federal authority or agency during 1996. -8- 9 The following table summarizes as of December 31, for each of the years presented, the standardized measure of discounted future net cash flows from proved oil and gas reserves that could be produced through the term of the concession, assuming exercise of the option to extend the term through 2025. Entre Lomas Joint Venture Standardized Measure of Discounted Future Net Cash Flows From Proved Oil and Gas Reserves (Applicable to the Company's Interest)
(Millions of U.S. Dollars) ------------------------ 1996 1995 1994 ------ ------ ------ Future revenues (1 and 2) $ 911 $ 732 $ 676 Future expenditures (3) 409 401 391 ------ ------ ------ 502 331 285 Argentine taxes (4) 155 90 77 ------ ------ ------ Future net cash flows 347 241 208 Less 10% annual discount for estimated timing of cash flows 182 127 113 ------ ------ ------ Discounted future net cash flows $ 165 $ 114 $ 95 ====== ====== ======
(1) Estimates are made of quantities and timing of future production of oil and gas reserves. (2) Estimates of gross revenues from sales are made using prices in effect at December 31 for each year presented. The per barrel price for 1996 is $24.52, as compared with $17.58 and $15.87 for 1995 and 1994, respectively. Gas prices for all years are based on gas sales contracts in effect during the respective years. Production forecasted beyond the term of gas sales contracts currently in effect, is assumed to be sold under the same contract terms. (3) Estimated production, transportation, marketing and development costs are based on the current cost of similar services and include all future capital expenditures. (4) Estimated taxes consider all taxes to which the Company is subject in Argentina. (5) Conversion to U.S. dollars is made utilizing the rate of exchange at December 31 for each of the years presented. -9- 10 DISCOUNTED FUTURE NET CASH FLOWS PRESENTED HEREIN MAY NOT BE RELIABLE DUE TO THE IMPRECISION OF ESTIMATING REMAINING RECOVERABLE RESERVES. ESTIMATES OF OIL AND GAS RESERVES AND RATES OF FUTURE PRODUCTION ARE INHERENTLY IMPRECISE AND CHANGE OVER TIME AS NEW INFORMATION BECOMES AVAILABLE. AS A RESULT, SUBSEQUENT REVISIONS OF THE QUANTITY AND VALUATION OF PROVED RESERVES MAY BE SIGNIFICANT. The following analysis summarizes for each of the years presented the factors that caused the increases (decreases) in the amount of discounted future net cash flows attributable to the estimate of the Company's proved oil and gas reserves. Entre Lomas Joint Venture Analysis of Changes in Standardized Measure of Discounted Future Net Cash Flows From Proved Oil and Gas Reserves (Applicable to the Company's Interest)
(Millions of U.S. Dollars) -------------------------- 1996 1995 1994 ------ ------ ------ Prices and costs: Net changes in prices and production costs $ 118 $ 12 $ 10 Quantities: Revenues, net of production costs (15) (11) (23) Additions and revisions of previous estimates - net (8) 14 111 Other: Changes in estimated future development costs (10) (2) (36) Accretion of discount 16 13 7 Net changes in Argentine taxes (35) (8) (24) Timing of future production and other (15) 1 (5) ------ ------ ------ Net increase (decrease) in discounted future net cash flows $ 51 $ 19 $ 40 ====== ====== ======
-10- 11 The following table shows total sales of crude oil and condensate and natural gas from the Entre Lomas field and average sales prices and production costs for the last three years, based on data supplied to the Company by Petrolera. Entre Lomas Joint Venture Sales and Price Statistics
1996 1995 1994 -------------- -------------- -------------- Total Sales-Gross - ----------------- Crude Oil and Condensate (bbls) 3,328,343 3,441,973 3,544,643 Gas (mcf) 17,717,528 12,242,384 11,780,564 LPG (tons) 14,348 15,764 18,126 Total Sales-Net to Company - -------------------------- Crude Oil and Condensate (bbls) 1,584,291 1,638,379 1,687,250 Gas (mcf) 8,433,543 5,827,375 5,607,548 LPG (tons) 6,829 7,504 8,628 Average Sales Prices (in U.S. Dollars) - -------------------------------------- Oil (per bbl) $ 20.87 $ 16.67 $ 15.11 Gas (per mcf) 1.33 1.23 1.05 LPG (per ton) 182.60 166.33 149.95 Average Production Costs (in U.S. Dollars) - ------------------------------------------ Oil (per bbl) $ 8.15 $ 7.13 $ 6.45 Gas (per mcf) .22 .19 .15 LPG (per ton) 82.59 65.47 53.24
Volumes presented in the above table represent those sold to joint venturers' customers and have not been reduced by the 12 percent provincial royalty, which is paid separately and is accounted for as an expense by the joint venture. In calculating royalty payments, the joint venturers are entitled to deduct gathering, storage, treating and compression costs. Average production cost is calculated by taking into consideration all costs of operating the Entre Lomas area, including the costs of remedial well workovers and depreciation of property and equipment. Variations in production costs have in the past been influenced by inflation and fluctuations in the value of the local currency versus the dollar over time. -11- 12 Total wells from all acreage in which the Company has an interest for the years ended December 31, 1996 and 1995, are as follows:
1996 1995 ----------- ----------- Gross Net Gross Net ----- ---- ----- ---- Oil 278 132 279 133 Gas 20 10 20 10 Abandoned and Inactive 20 10 13 6 Injection 88 41 81 38 ---- ---- ---- ---- Total 406 193 393 187 ==== ==== ==== ====
The following table details total investments made by the Entre Lomas partners and net to the Company's 47.6% interest.
1996 1995 1994 --------------- --------------- --------------- Gross Net Gross Net Gross Net ------ ------ ------ ------ ------ ------ (US $ Millions) Development 22 10 21 10 8 4 Exploration 3 1 2 1 4 2 Workovers 7 3 5 2 3 1 ------ ------ ------ ------ ------ ------ Total 32 14 28 13 15 7 ====== ====== ====== ====== ====== ======
Major development expenditures for 1996 include drilling and completing nine in-fill and step-out wells in existing oil and gas fields, converting seven wells from production to injection in the CB/PB field complex, increases in lift capacity, and expenditures associated with implementing a system to reinject produced water. Major exploration expenditures for 1996 include drilling the Borde Mocho well, described on page 14, under "Exploration." Remedial well workovers are charged to operating expense but are a major expenditure category. In 1992, Argentina passed environmental control legislation in the form of Law 2,391. As a result, from 1993 through 1996, investments have been made to improve the concession's existing system of produced water disposal. Till now fresh water has been the sole source of injection in both waterflood projects in the concession. Produced water was disposed of in evaporation and filtration pits. Commencing 1996, surface disposal of produced water is no longer occurring. The joint venture is now undertaking a multi phase program to replace all surface and down hole injection lines to withstand the corrosive effects of reinjecting formation water. This program is currently estimated to cost $9 million, ($4 million net). -12- 13 The Entre Lomas field consists of approximately 183,000 acres, of which 33,658 acres are presently producing. The Company's 47.6 percent interest is equivalent to approximately 87,000 total net acres and 16,035 producing net acres. The aggregate amounts of capitalized costs related to the Company's oil and gas producing activities are as follows:
(Thousands of U.S. Dollars) -------------------------- 1996 1995 --------- --------- Proved oil and gas properties $ 54,530 $ 44,028 Accumulated depreciation, depletion and amortization 22,763 16,850 --------- --------- Net capitalized costs $ 31,767 $ 27,128 ========= =========
EXPLORATION The Entre Lomas concession consists of 183,000 acres of which 33,658 acres are presently producing. Since 1960, when the first exploration well was drilled, there have been drilled inside the concession 406 wells of which only a few have been drilled significant distances from the main producing fields. Although the joint venture believes the major producing structures have been identified and are being developed, the concession remains relatively unexplored. The Joint venturers are now in the midst of an effort to identify additional unexplored hydrocarbon accumulations which may exist inside the concession boundaries. In 1993, the partners completed an intensive seismic program which included reprocessing seismic shot in prior years and shooting approximately 300 miles of new 2D seismic. The results of this program were interpreted and several structures identified as potential drilling targets. These new prospects target both oil and gas in formations known to be productive in the concession, including the Tordillo, Quintuco and Petrolifera formations. In addition, it is the joint venture's intention to test deeper formations which have never been investigated in the concession. During 1993 and 1994, the partners carried out an intensive seismic program which included reprocessing seismic shot in prior years and shooting approximately 300 miles of new 2D seismic. Several structures were identified as potential drilling targets. New prospects target both oil and gas in formations already known to be productive in the concession and never investigated deeper formations. After evaluation of 2D seismic and drilling the unsuccessful La Pista X-1 exploration well, the decision was made to focus 3D seismic on the area of greatest exploration interest. In 1995, the joint venture completed a $1.6 million 3D seismic program covering 90 square kilometers in the center of the concession. The area included the Entre Lomas structure and acreage to the northwest and southeast of the Entre Lomas oil and gas fields. -13- 14 The joint venture is currently evaluating the exploration potential of the Los Alamos and Lomas de Ocampo areas. These areas were lightly explored in the early life of the concession and have produced from a few wells small amounts of oil from the Tordillo and Quintuco formations. In mid 1997, the joint venture will drill a test well to investigate the deepest sedimentary layers in the concession. The well will be located in the northwest part of the Entre Lomas oil field discussed in the previous paragraph. BORDE MOCHO In early 1996, the joint venture drilled the Borde Mocho 1 well. This exploration well was completed in both the Quintuco and Tordillo formations. Quintuco production has been limited and the Tordillo formation has produced a high percentage of water. The well continues to be monitored. A second well may be drilled here in 1997 to better define the production potential of this structure. ACAMBUCO The Company owns a 1.5% participation interest in the Acambuco joint venture, an oil and gas exploration and development concession located in Northwest Argentina, in the province of Salta, on the border with Bolivia. The Acambuco concession covers an area of 267,000 acres. The Company has been a participant in the Acambuco area since 1981. Three wells were drilled unsuccessfully in the early 1980's to depths ranging from 16,000 to 18,000 feet. Although two wells gave indications of oil and gas productive potential, they had to be abandoned for mechanical reasons. By the end of 1993 all activity in this area had been unsuccessful. However, the concession remained lightly explored. Significant gas production and reserves exist to the south and east of the concession in the Ramos and Aguarague concessions. In October 1994, the Acambuco partners, consisting of Bridas S.A.P.I.C., Northwest Argentina Corporation and the Company, entered into a farmout agreement with YPF, whereby YPF received a 45% interest in the concession in exchange for drilling, within five years, four exploration wells on four separate geological structures, the costs of which are to be paid 100% by YPF. The agreement also provides that YPF will finance development drilling which might result from successful exploration. Such financing is non-recourse and to be repaid without penalty or interest out of production revenues from the concession. The Company has the option, in each exploration prospect which is drilled, to either proportionately reduce its 1.5% interest by 45%; pay its share of the exploration costs; or exercise the non-consent penalty provisions of its 1984 agreement with Bridas while retaining its 1.5% interest. -14- 15 YPF and Bridas believe that the area has gas potential and could be a possible source of future gas exports to major consumption centers in Brazil. However, it is an overthrust area, with very complex geology wherein drilling is extremely difficult and costly. The objective formations are deep with well depths likely to reach 18,000 feet and a high risk of mechanical problems, such as those encountered by Bridas, Northwest Argentina and the Company in the early 1980's. Pursuant to terms of the farmout program, the San Pedrito X-1 well was drilled to 15,700 feet. This well, which started drilling in March 1995, found the upper section of Huamampampa formation in April 1996, and though it did not transverse the formation completely, it successfully tested 42 million cubic feet per day of gas and 1,900 barrels per day of condensate. For this initial exploration well, the Company exercised its non-consent option. Total well cost reached $45 million due to problems encountered during drilling such as severe formation pressures, sidewall cave- ins and stuck drill pipe. In May 1996, YPF commenced drilling the San Antonio x-1 well also with the objective of reaching the Huamampampa formation. This well is currently drilling at 14,300 feet and is one month behind schedule due to mechanical problems. For this second well, the Company also exercised its non-consent option. Cumulative costs to date are $30 million. The Acambuco partners have approved an additional project to test the Huamampampa. Sometime in 1997, the joint venture will reenter the Macueta 1002 well and drill horizontally to a higher position in the Macueta structure where fractures are believed to exist in the formation. This well is one of the three original wells drilled in the early 1980's. Recent seismic interpretation has revealed that the well was drilled on the flank of the Macueta structure. ECONOMIC AND POLITICAL ENVIRONMENT Since 1989, the government of President Menem has pursued free market policies, including the privatization of state-owned companies, deregulation of the oil and gas industry, which included the successful sale of YPF shares in public markets, tax reform to equalize income tax rates for domestic and foreign investors, liberalization of import and export laws, and the lifting of exchange controls. The cornerstone of the country's economic reforms since 1989 has been its change in monetary policy. By early 1991, the exchange rate between the austral and the U.S. dollar reached 10,000 to 1. In April of that year, the convertibility law was implemented and the austral was renamed the peso. One peso became the equivalent of 10,000 former australs, establishing an exchange rate of one Argentine peso to one U.S. dollar. The convertibility plan requires that the country's monetary base be backed by an equivalent amount of international reserves, including U.S. dollars and gold. Essentially, the policy guarantees an exchange rate of 1:1. The Argentine government has not strayed from this policy since implementation of the plan. These policies have been successful as evidenced, first, by a reduction in annual inflation from the 1989 rate of 5,000 percent to less than 5 percent in 1996 and, second, an influx of foreign investment capital into the country. -15- 16 President Menem was reelected in May 1995 for a second four year term. He has indicated his intention to continue the free market policies and monetary reforms which have worked so well. In July 1996, he replaced Domingo Cavallo, Economy Minister and author of the convertibility plan, with Roque Fernandez, formerly president of the Central Bank. The country's economy showed no adverse reactions to this replacement. ITEM 2. PROPERTIES See ITEM 1(c) for a description of properties. ITEM 3. LEGAL PROCEEDINGS Other than as described in the financial statements, there are no material pending legal proceedings to which the Company is a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -16- 17 P A R T II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS At December 31, 1996, there were 1,394 record holders of the Company's ordinary shares, $0.01 par value. The ordinary shares are traded sporadically in the over-the-counter market. The Company understands that the trades which occur are made both at the quoted market price or on a negotiated basis outside of the quoted market. The high and low bid prices listed below were provided to the Company by the National Association of Securities Dealers Automated Quotation System (NASDAQ). As described on page 19, under "Management's Discussion and Analysis of Financial Condition and Results of Operations", in 1995, the Entre Lomas partners raised the level of capital spending in the concession. As a result, in order to assure the Company has available the financial resources required to carry out this heightened level of spending, effective the third quarter of 1995, the Company reduced its quarterly dividend to 16.25 cents per share from the previous level of 32.5 cents. Future dividends are necessarily dependent upon numerous factors, including, among others, earnings, capital spending, changes in governmental regulations and changes in crude oil and natural gas prices. The Company reserves the right to change the level of dividend payments or to discontinue or suspend such payments at the discretion of the Directors.
Stock Price --------------------- High Low Dividend ---- ---- -------- Quarter of 1995 First $ 15 1/4 $ 14 $ .32 1/2 Second 15 3/4 15 1/4 .32 1/2 Third 16 1/4 15 .16 1/4 Fourth 16 3/4 14 3/4 .16 1/4 Quarter of 1996 First $ 17 3/4 $ 16 1/2 $ .16 1/4 Second 28 16 3/4 .16 1/4 Third 23 1/2 21 .16 1/4 Fourth 29 1/2 24 .16 1/4
The Company has been advised that: a Cayman Islands company may not pay dividends to shareholders out of its share capital or share premium account; there are no Cayman Islands laws, decrees or regulations relating to restrictions on the import or export of capital or exchange controls affecting remittances of dividends, interest and other payments to non-resident holders of the Company's ordinary shares; there are no limitations either under the laws of the Cayman Islands or under the Company's Memorandum or Articles of Association restricting the right of foreigners to hold or vote the Company's ordinary shares; there are no existing laws or regulations of the Cayman Islands imposing taxes or containing withholding provisions to which United States holders of the Company's ordinary shares are subject; and there are no reciprocal tax treaties between the Cayman Islands and the United States. -17- 18 ITEM 6. SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992 ------- ------- ------- ------- ------- (Dollars in thousands except per share amounts) Revenues $46,765 $36,942 $33,267 $31,524 $36,281 Net Income 12,661 8,268 8,168 9,305 11,281 Income per Ordinary Share 1.72 1.12 1.11 1.26 1.53 Dividends Declared per Ordinary Share .65 .975 1.30 1.30 1.29 Total Assets at December 31 55,684 46,498 44,342 46,378 46,597 Stockholders' Equity at December 31 43,578 35,702 34,610 36,010 36,273
-18- 19 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES CASH FLOW The Company and its Entre Lomas partners continue their efforts to maximize cash flow from the Entre Lomas concession. During 1996, the Company received $9.8 million in distributions and dividends compared with $7.2 million and $12.8 million in 1995 and 1994, respectively. Receipt of future distributions will depend on the joint venture's ability to generate profits, cash availability exceeding capital requirements, and continued ability to repatriate funds free from government control and restrictions. OIL PRICES The increase in oil prices which occurred during 1996 has positively impacted the Company's earnings. In the year, the sales price of oil averaged $20.87, as compared with $16.67 and $15.11, for 1995 and 1994, respectively. This increase was the most important factor contributing to the $12.7 million net income generated during the year, the second highest level ever reported by the Company. Price exceeded $24 late in 1996 but has lately fallen back near $20 during the first quarter of 1997. It is uncertain whether recent levels can be sustained. Although oil prices appear to have stabilized, a return to 1995 and 1994 levels is possible. Each price scenario would have its corresponding affect on the Company's 1997 results and beyond. Oil prices are affected by multiple factors which include among others, worldwide production and demand, inventory levels, weather, and political factors in the middle east and other oil producing regions. OIL PRODUCTION As described on page 7, under "Entre Lomas Fields" and "Oil Reservoirs", during 1996 and early 1997, four wells drilled in the Entre Lomas field have been significantly more productive in the early stages of their life cycle than previously drilled wells. Results of these four wells have been largely responsible for raising daily oil production in the concession from approximately 9,000 barrels per day in early 1996, to greater than 11,000 barrels per day today. Additional wells to extend development of this field will be drilled in 1997. GAS DEVELOPMENT The increase in gas sales volumes which occurred during 1996 also contributed to the improved results for the year. The volume increase was attributable to success of gas development efforts described on page 7, under "Entre Lomas Fields" and "Gas -19- 20 Reservoirs." Gas production is not expected to increase further, as it is felt that drilling to date has fairly well defined the limits of the new gas field. CAPITAL SPENDING In mid-1995, the Entre Lomas partners reached an understanding with regard to increasing the level of capital expenditures in the concession over five years with the objective of fully developing existing producing fields in the concession and continuing the program of exploration commenced in 1993. This understanding is not an expenditure commitment by the partners, but a general agreement about long term development in the concession. Actual future investments will be defined through the annual budgeting process. The investment table presented on page 12 indicates that total development, exploration and workover expenditures in the concession have increased from $15 million in 1994 to $32 million in 1996. It is the intention of the partners to maintain investments at this level for the foreseeable future. Doing so is contingent on the success of the program and continued stability of oil and gas prices. To date, the combination of rising sales prices and oil production have enabled the joint venture to increase capital spending while maintaining distribution payments to its partners. RESULTS OF OPERATIONS REFER TO CONSOLIDATED STATEMENT OF OPERATIONS ON PAGE 25. 1996 VS 1995 Operating revenues increased by $10.2 million compared with 1995. The primary cause of this increase was higher oil sales prices which in 1996, on a per barrel basis, averaged $20.87 versus $16.67 during 1995; increased gas sales volume resulting from the success of gas development efforts in the Entre Lomas gas field described on page 7 under "Entre Lomas Fields;" and higher contract gas prices in effect during 1996. Other revenues decreased $389 thousand as a result of lower interest rate yields during 1996 on the Company's short term financial investments. Operating expenses increased $1.8 million compared with the prior year due to a greater number of well workovers in producing wells. Depreciation, depletion and amortization increased by $951 thousand due to capital expenditures exceeding depreciation thereby resulting in increases in the Company's depreciable property and equipment base. Exploration expense decreased $773 thousand compared with the prior year due to costs of 3D seismic incurred in 1995. No seismic expenditures were made in 1996. Argentine taxes increased by $2.5 million over the prior year due to higher production and sales taxes directly associated with higher operating revenues, greater income -20- 21 taxes associated with higher Argentine taxable income, and the increase in Argentina's income tax rate from 30% to 33%, which went into effect in 1996. 1995 VS 1994 Operating revenues increased by $3.2 million compared with 1994. The primary causes of this increase were higher oil sales prices, which in 1995, on a per barrel basis, averaged $16.67 versus $15.11 during 1994; increased gas sales volumes, resulting from the success of gas development efforts in the new Entre Lomas gas field, described on page 7 under "Entre Lomas Fields"; and higher contract gas prices in effect during 1995. Other revenues increased by $442 thousand as a result of significantly higher interest rate yields during 1995 on the Company's short term financial investments. Operating expense increased by $1.2 million compared with the prior year due to several factors, the two most important of which are greater number of well workovers in both producing and injection wells, and costs associated with a polymer injection pilot implemented in the early part of the year. Depreciation, depletion and amortization increased by approximately $933 thousand due to a combination of capital expenditures exceeding depreciation thereby resulting in increases in the Company's depreciable property and equipment base, and adjustments to estimates of the Company's oil and gas reserves as compared with the prior year. Exploration expense increased by $917 thousand compared with the prior year due to costs of the 3D seismic program conducted during the early part of the year and the charge associated with the write off of the La Pista x-1 well. Argentine taxes increased by $914 thousand over the prior year due to additional production and sales taxes directly associated with higher operating revenues and greater income taxes associated with higher Argentine taxable income. In 1994, as a result of new environmental regulations in Argentina, the joint venture began to accrue costs for future plugging and abandonment of wells in all of its producing fields. This accrual was initiated with a retroactive charge in 1994 and is the principal cause of the $886 thousand reduction in other expense. -21- 22 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Report of Independent Public Accountants 23 Consolidated Balance Sheets December 31, 1996 and 1995 24 Consolidated Statements of Operations Three Years Ended December 31, 1996 25 Consolidated Statements of Stockholders' Equity Three Years Ended December 31, 1996 26 Consolidated Statements of Cash Flows Three Years Ended December 31, 1996 27 Notes to Consolidated Financial Statements 28
Schedules--All schedules have been omitted, as the required information has been included in the consolidated financial statements and notes thereto, or because the schedules are not applicable or required. -22- 23 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Apco Argentina Inc.: We have audited the accompanying consolidated balance sheets of Apco Argentina Inc. (a Cayman Islands corporation) and subsidiary as of December 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Apco Argentina Inc. and subsidiary as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Tulsa, Oklahoma February 27, 1997 -23- 24 APCO ARGENTINA INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands) December 31, -------------------- 1996 1995 -------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 4) $ 18,953 $ 17,244 Accounts receivable 6,375 5,699 Inventory 4,098 2,480 Other current assets 364 217 -------- -------- Total current assets 29,790 25,640 Property and Equipment: Cost 54,891 44,406 Accumulated depreciation (29,129) (23,601) -------- -------- 25,762 20,805 Other assets 132 53 -------- -------- $ 55,684 $ 46,498 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 2,835 $ 3,922 Accrued liabilities 5,687 3,306 Dividends payable 1,196 1,196 -------- -------- Total current liabilities 9,718 8,424 -------- -------- Other liabilities 2,388 2,372 Commitments and Contingencies (Notes 2 and 8 ) -- -- STOCKHOLDERS' EQUITY: Ordinary shares, par value $.01 per share; 15,000,000 shares authorized; 7,360,311 shares outstanding 74 74 Additional paid-in capital 9,326 9,326 Retained earnings 34,178 26,302 -------- -------- Total stockholders' equity 43,578 35,702 -------- -------- $ 55,684 $ 46,498 ======== ========
The accompanying notes are an integral part of these consolidated statements. -24- 25 APCO ARGENTINA INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share) For the Years Ended December 31, ------------------------------- 1996 1995 1994 -------- -------- -------- REVENUES: Operating revenues $ 45,954 $ 35,742 $ 32,509 Other revenues 811 1,200 758 -------- -------- -------- 46,765 36,942 33,267 -------- -------- -------- COST AND EXPENSES: Operating expense 14,186 12,355 11,166 Provincial royalties 5,155 3,759 3,260 Selling and administrative 2,162 2,371 2,362 Depreciation, depletion and amortization 5,576 4,625 3,692 Exploration expense 684 1,457 540 Argentine taxes (Note 8) 6,562 4,046 3,132 Other (income) expense, net (221) 61 947 -------- -------- -------- 34,104 28,674 25,099 -------- -------- -------- NET INCOME $ 12,661 $ 8,268 $ 8,168 ======== ======== ======== INCOME PER ORDINARY SHARE $ 1.72 $ 1.12 $ 1.11 ======== ======== ======== AVERAGE ORDINARY SHARES AND EQUIVALENTS OUTSTANDING 7,360 7,360 7,360 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. -25- 26 APCO ARGENTINA INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in Thousands) Additional Ordinary Shares Paid-in Retained Shares Amount Capital Earnings -------- -------- -------- -------- BALANCE, January 1, 1994 7,360 $ 74 $ 9,326 $ 26,610 Net income -- -- -- 8,168 Dividends declared ($1.30 per share) -- -- -- (9,568) -------- -------- -------- -------- BALANCE, December 31, 1994 7,360 74 9,326 25,210 Net income -- -- -- 8,268 Dividends declared ($0.975 per share) -- -- -- (7,176) -------- -------- -------- -------- BALANCE, December 31, 1995 7,360 74 9,326 26,302 Net income -- -- -- 12,661 Dividends declared ($0.65 per share) -- -- -- (4,785) -------- -------- -------- -------- BALANCE, December 31, 1996 7,360 $ 74 $ 9,326 $ 34,178 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. -26- 27 APCO ARGENTINA INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, -------------------------------- 1996 1995 1994 -------- -------- -------- (Amounts in Thousands) CASH FLOW FROM OPERATING ACTIVITIES: Net income $ 12,661 $ 8,268 $ 8,168 Adjustments to reconcile to cash provided by operating activities: Depreciation, depletion and amortization 5,576 4,625 3,692 Abandonment of well drilled in prior year 496 502 -- Reclassification of plugging and abandonment provision from other liabilities to accumulated depreciation -- 626 -- Decrease (increase) in accounts receivable (676) 340 3,275 Increase in inventory (1,618) (135) (79) Decrease (increase) in other current assets (147) 39 (80) Increase (decrease) in accounts payable (1,087) 1,944 (176) Increase (decrease) in accrued liabilities 2,381 788 (1,163) Other, including changes in non-current assets and liabilities (63) (488) 700 -------- -------- -------- Net cash provided by operating activities 17,523 16,509 14,337 -------- -------- -------- CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures (11,029) (10,062) (5,364) CASH FLOW FROM FINANCING ACTIVITIES: Dividends paid (4,785) (8,372) (9,568) -------- -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS 1,709 (1,925) (595) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,244 19,169 19,764 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 18,953 $ 17,244 $ 19,169 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 4,043 $ 2,785 $ 3,522
The accompanying notes are an integral part of these consolidated statements. -27- 28 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES GENERAL AND PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Apco Argentina Inc. (a Cayman Islands corporation) and its wholly owned subsidiary, Apco Properties Ltd. (a Cayman Islands corporation), which are herein collectively referred to as the Company. The Company is engaged in joint ventures in oil and gas exploration, development and production in Argentina. Its principal business is a 47.6 percent participation in the Entre Lomas Concession, which is accounted for following the proportional consolidation method. The Williams Companies, Inc. ("Williams") owns 67.14 percent of the outstanding ordinary shares of the Company. Oil and gas operations are risky in nature. A successful operation requires that a Company deal with uncertainties about the subsurface that even a combination of experience, scientific information and careful evaluation cannot always overcome. Because the Company's assets are located in Argentina, management, for many years, as described in Note 9, was required to deal with threats from inflation, devaluation and currency controls. Since 1991, the economic and political environment in the country has improved dramatically due to free market economic policies implemented by the government of President Carlos Menem. These policies have resulted in significantly reducing inflation and stabilization of the Argentine peso. In May of 1995, President Menem was reelected for a second four year term. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PROPERTY AND EQUIPMENT Property is recorded at cost. Oil and gas properties are depreciated over their productive lives using the units of production method. All other property is depreciated on a straight-line basis, using estimated useful lives of 3 to 15 years. -28- 29 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued NET INCOME PER ORDINARY SHARE Net income per ordinary share is based on the weighted average number of ordinary shares outstanding. FOREIGN EXCHANGE The general policy followed in the translation of the Company's financial statements of foreign operations into United States dollars is in accordance with Statement of Financial Accounting Standards No. 52, using the United States dollar as the functional currency. INCOME TAXES Provision is made for deferred income taxes applicable to temporary differences between the financial statements and tax basis of the assets and liabilities, if any. (2) ACAMBUCO JOINT VENTURE The Company is a participant in the Acambuco joint venture and has a 1.5 percent interest in an oil and gas concession in the Acambuco area, located in northwest Argentina. Bridas S.A.P.I.C. ("Bridas") is the operator of the joint venture. As part of the settlement of a 1983 dispute between Bridas, Northwest Argentina Corporation, a Williams subsidiary, and the Company, in 1984, Williams agreed to guarantee the payment of principal, interest and other costs related to a $7.9 million loan obtained from a U.S. bank by Bridas S.A., an affiliate of Bridas. Pursuant to the terms of the third amendment to the loan agreement and the loan guarantee agreement, payments on the loan began May 15, 1992. To date all principal and interest payments have been made on schedule and the current loan balance is $2.2 million. Any U.S. dollar shortfall which may result from loan payments made in Argentine currency by Bridas shall be borne equally by Bridas and Williams. Because Williams' guarantee directly benefits the Company and Northwest Argentina Corporation, the Company and Northwest Argentina Corporation have each agreed to pay Williams one-half of any amounts paid by it as a result of a Bridas default. -29- 30 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (3) ENTRE LOMAS JOINT VENTURE The Company owns a 23 percent direct interest in the Entre Lomas joint venture. It also owns a 24.6 percent indirect interest by virtue of its 33.68 percent stock ownership in Petrolera Perez Companc S.A., the operator of the joint venture, which owns 73.15 percent of the joint venture. Consequently, the Company's combined direct and indirect interests in the Entre Lomas joint venture total 47.6 percent. The joint venture is engaged in the exploration, development and production of oil and gas in the Entre Lomas concession located in the provinces of Rio Negro and Neuquen in southern Argentina. The Company's pro-rata share of the assets, liabilities, revenues and expenses of the Entre Lomas joint venture and Petrolera Perez Companc are reflected in the Company's Consolidated Financial Statements using proportional consolidation. The Entre Lomas joint venture uses the successful-efforts method of accounting for oil and gas exploration and production operation, whereby costs of acquiring non-producing acreage, costs of drilling successful exploration wells and development costs are capitalized. Costs of unsuccessful drilling are expensed as incurred. The Entre Lomas concession is evaluated periodically and, if conditions warrant, an impairment reserve would be provided. Statement of Financial Accounting Standards No. 69, "Disclosures About Oil and Gas Producing Activities", requires certain disclosures about oil and gas producing activities. Unaudited information regarding the Company's interest in the Entre Lomas joint venture is presented on pages 5 through 13. -30- 31 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (4) CASH EQUIVALENTS Cash equivalents are defined by the Company as short-term investments with original maturities of three months or less. Amounts are stated in thousands of dollars.
Principal ------------------- 1996 1995 -------- -------- Short-term investments: Eurodollar term deposits with interest ranging from 4 15/16 -5 1/4 in 1996 and 5 3/16 - 5 1/2 % in 1995, maturing in January 1997 and January 1996, respectively $ 13,640 $ 11,972 Argentine time deposits 5,313 4,701 -------- -------- $ 18,953 $ 16,673 ======== ========
The carrying amount reported in the balance sheet for short-term investments is equivalent to fair value. (5) MAJOR CUSTOMERS Sales to customers with greater than ten percent of total sales consist of the following:
For the Years Ended December 31, ----------------------------- 1996 1995 1994 ---- ---- ---- San Lorenzo S.A 62.1% 35.4% 22.3% EG3 S.A * 26.2% 14.2% Litoral S.A 13.1% 16.7% 13.7% Interpetrol International S.A * * 28.2% Isaura S.A * * 10.6%
* Less than 10 percent -31- 32 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (6) RELATED PARTY TRANSACTIONS The Company paid approximately $182,000, $206,000, and $204,000 in 1996, 1995 and 1994, respectively, to Williams and affiliates for management services, general and administrative expenses and purchases of materials and supplies. Accounts payable to Williams and affiliates outstanding at December 31, 1996 and December 31, 1995, of approximately $58,000 and $22,000, were paid in 1997 and 1996 respectively. (7) CAYMAN ISLANDS AND UNITED STATES INCOME TAXES In 1979, the Company changed the jurisdiction of its incorporation from Delaware to the Cayman Islands. The Company's income since that date, to the extent that it is derived from sources outside the U.S., generally is not subject to U.S. Federal income taxes. Also, the Company has been granted an undertaking from the Cayman Islands government, expiring in 1999, to the effect that the Company will be exempt from tax liabilities resulting from tax laws enacted by the Cayman Islands government subsequent to 1979. The Cayman Islands currently has no applicable income tax or corporation tax and, consequently, the Company believes its earnings are not subject to U.S. income taxes or Cayman Islands income or corporation taxes. (8) ARGENTINE TAXES The Company recorded Argentine taxes as presented in the following table. Amounts are stated in thousands of dollars.
1996 1995 1994 -------- -------- -------- Income taxes $ 5,830 $ 3,460 $ 2,704 Other taxes 732 586 428 -------- -------- -------- $ 6,562 $ 4,046 $ 3,132 ======== ======== ========
In 1988, the Argentine government amended the obligatory Savings Law requiring that all taxpayers deposit with the government, both in 1988 and 1989, amounts computed on the basis of prior year taxable incomes. The deposits were to be repaid after five years and earned interest at the rate stipulated by the law. It was the point of view of the joint venture and the advice of its legal counsel that it was exempted from these deposits due to the tax exemption granted in the original Entre Lomas contract number 12,507. As a result the deposits were not made. -32- 33 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued In August 1993, the Direccion General Impositiva ("DGI"), the Argentine taxing authority, made a claim against Petrolera for the delinquent deposits pertaining to the Entre Lomas operation, which including interest and indexation for inflation, amounts to $9.2 million. An appeal was filed by Petrolera in Argentine Federal Tax Court. In the opinion of Petrolera's management and legal counsel, the possibility that this claim will result in an unfavorable outcome for the joint venture is remote. The Company has no reason to believe otherwise, and accordingly, has not recorded a liability for its share of the asserted claim. In March 1993, the Neuquen Tax Bureau demanded that Petrolera pay the Stamp Tax on Additional Clause No. 3, the third amendment to the original Entre Lomas contract number 12,507. Petrolera appealed this decision before the Tax Court of the province and lost. In March 1994, Petrolera deposited $1.6 million, the sum claimed, and subsequently filed a suit before the Neuquen Superior Court asking for full reimbursement. Should Petrolera not prevail in Superior Court, in the opinion of its management and legal counsel, it is entitled to seek reimbursement from YPF pursuant to terms of contract 12,507. Accordingly, the amount deposited has been recorded as a receivable by both Petrolera and the Company. In 1996, the Rio Negro Tax Bureau also demanded that Petrolera pay Stamp Tax on Additional Clause No. 3. No amount has been specified as yet. Petrolera has contested Rio Negro's claim on the basis that the statute of limitations on its claim has expired. In the opinion of Petrolera's management and legal counsel, this position should prevail. (9) ARGENTINE CURRENCY FLUCTUATIONS Argentina has over the years experienced cycles of acute inflation followed by extreme devaluation. However, inflation and devaluation have diminished since 1991 due to implementation of the convertibility law, privatization of public sector Companies, deregulation and modifications in fiscal and monetary policy. By early 1991, the exchange rate between the austral and the U.S. dollar reached 10,000 to 1. In April of that year, the convertibility law was implemented and the austral was renamed the peso. One peso became the equivalent of 10,000 former australs, establishing an exchange rate of one Argentine peso to one U.S. dollar. The convertibility plan requires that the country's monetary base be backed by an equivalent amount of international reserves, including U.S. dollars and gold. Essentially the policy guarantees an exchange rate of 1:1. No exchange gains or losses have been realized by the Company during the three years ended December 31, 1996 as the rate of exchange has remained 1 to 1. -33- 34 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (10) QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- (Amounts in Thousands Except Per Share Amounts) 1996 Revenues $ 9,365 $13,104 $11,345 $12,951 Costs and expenses 7,040 9,274 7,967 9,823 Net Income 2,325 3,830 3,378 3,128 Net income per ordinary share .32 .52 .46 .42 1995 Revenues $ 8,733 $ 9,443 $ 9,884 $ 8,882 Costs and expenses 6,659 7,727 7,563 6,725 Net income 2,074 1,716 2,321 2,157 Net income per ordinary share .28 .23 .32 .29
-34- 35 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS None. P A R T III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a) IDENTIFICATION OF DIRECTORS
Director's Term of Director Office Name Age Position Since Expires --------------- --- ------------------------ ----- ------- J. C. Bumgarner 54 Chairman of the Board and 1994 1997 Chief Executive Officer J. H. Williams 78 Director 1992 1999 K. E. Bailey 54 Director 1987 1998
(b) IDENTIFICATION OF EXECUTIVE OFFICERS Executive officers of the Company are elected by the Board of Directors and hold office until relieved of such office by action of the Board of Directors.
Director Name Age Position Since --------------- --- -------------------- ----- John C. Bumgarner 54 Chairman of the Board and 1996 Chief Executive Officer J. D. McCarthy 54 Vice President and 1991 Chief Financial Officer Thomas Bueno 45 Controller and Chief 1991 Accounting Officer
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES None. -35- 36 (d) FAMILY RELATIONSHIPS There are no family relationships between any director or executive officer and any other director or executive officer in the Company. (e) BUSINESS EXPERIENCE Mr. Bumgarner is Senior Vice President Corporate Development and Planning of Williams and President of Williams International Company. He has held various officer level positions with Williams since 1977. Mr. Williams is engaged in personal investments. He was Chairman of the Board and Chief Executive Office of Williams prior to retiring in 1978. Mr. Williams is also a director of General Cable Corporation and Unit Corporation. Mr. Bailey is Chairman of the Board, Chief Executive Officer and President of Williams. He has held various other officer level positions with Williams and its subsidiaries since 1975. J. D. McCarthy is Senior Vice President of Finance of Williams. He was previously Vice President and Treasurer of Williams from 1987 through 1991. Thomas Bueno was Manager of Finance and Accounting of the Company from 1985 through 1991. (f) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS None. ITEM 11. EXECUTIVE COMPENSATION (a) CASH COMPENSATION The Company has not paid its present executive officers any cash compensation or bonuses. (b) COMPENSATION PURSUANT TO PLANS None. (c) OTHER COMPENSATION None. (d) COMPENSATION OF DIRECTORS Directors who are employees of Williams receive no additional compensation for service on the Board of Directors. Directors who are not employees of Williams receive an annual retainer of $8,000 and an additional fee for attending Board meetings of $500 per meeting. -36- 37 (e) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT None. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AT DECEMBER 31, 1996
Amount and Nature of Beneficial Percent Name and Address of Ownership of Title of Class Beneficial Owner (Note 1) Class ------------------ ---------------------------------- ----------- ------ Ordinary Shares The Williams Companies, Inc. 4,941,822 67.14 $.01 Par Value One Williams Center Tulsa, Oklahoma 74172 Ordinary Shares I. Wistar Morris, III 500,543 6.8 $.01 Par Value 200 Four Falls Corporate Center Suite 208 West Conshohocken, PA 19428 Ordinary Shares Lehman Brothers Holdings Inc. 368,279 5.0 $.01 Par Value 3 World Financial Center, 24th Floor New York, NY 10285
(b) SECURITY OWNERSHIP OF MANAGEMENT AT DECEMBER 31, 1996 Each of the directors of the Company beneficially owns ten shares of the Company's ordinary shares, $.01 par value, as director's qualifying shares. (c) CHANGES IN CONTROL None. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Certain relationships and related-party transactions are disclosed elsewhere herein in Notes 1, 2 and 6 to the Notes to Consolidated Financial Statements. -37- 38 P A R T IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES Financial Statements filed in this report are set forth in the Index to Consolidated Financial Statements under Item 8. All schedules have been omitted as the required information has been included in the consolidated financial statements and notes thereto, or because the schedules are not applicable or required. (b) REPORTS ON FORM 8-K None. (c) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
Exhibit Number -------- *(3) - Memorandum of Association of Apco Argentina Inc. as amended August 20, 1980, as filed with Form 10-K of the Company for the fiscal year ended on December 31, 1980, Commission File No. 0-8933 dated April 30, 1981. *(3) - Articles of Association of Apco Argentina Inc. as filed with Form S-14 (Registration No. 2-6354), dated March 16, 1979. *(10) - Acambuco Area Operating Contract, which became effective April 23, 1981, as filed with Form 10-K, No. 0-8933, dated April 14, 1982. *(10) - Translation of agreement dated August 30, 1979, between Bridas, Socma, Inalruco and YPF for the exploration, development and exploitation of hydrocarbons in the Acambuco area, as filed with Form 10-K, No. 0-8933, dated April 12, 1984. *(10) - Translation of Additional Clause Number 1, dated March 22, 1983 to the Agreement with YPF for the exploration, development and exploitation of hydrocarbons in the Acambuco area, officially approved by the executive branch of the Argentine government on November 11, 1983, as filed with Form 10-K, No. 0-8933, filed April 12, 1984. *(10) - Agreement dated April 23, 1981, among the Company and Bridas S.A.P.I.C., with respect to the Acambuco project, Salta province, Argentina, as filed with Form 10-K, No. 0-8933, dated April 14, 1982.
-38- 39 *(10) - Agreement between The Williams Companies, Inc., Northwest Argentina Corporation and Apco Argentina Inc. dated April 15, 1987 relating to reimbursement of costs incurred by Williams pursuant to the guarantee by Williams of the bank loan made to Bridas in connection with the release by Bridas of Northwest Argentina Corporation's and Apco Argentina Inc.'s liability in the Acambuco Joint Venture as filed with Form 10-K, No. 0-8 933, dated April 11, 1988. *(10) - Agreement dated March 13, 1968, between Perez Companc and YPF for the Exploration, Exploitation and Development of the "Entre Lomas" area, Contract Number 12,507 as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Translation dated November 18, 1970, of agreement dated March 13, 1968, between Perez Companc and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated April 1, 1968, among Apco Oil Corporation, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated February 29, 1972, among the Company, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Joint Venture Agreement dated March 23, 1977, among the Company, Perez Companc and Petrolera as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Assignment dated February 10, 1977, between YPF and Gas del Estado as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Contract dated December 1977 amending the March 13, 1968 Agreement between Perez Companc and YPF as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Form of Separation Agreement dated September 22, 1978, between Apco and the Company as filed with Form S-1, Registration No. 2-62187 dated September 26, 1978. *(10) - Memorandum of Agreement dated August 16, 1979, among the Company, Perez Companc and Petrolera as filed with Form 10-K, No. 0-8933, dated March 28, 1980. *(10) - Agreement dated December 7, 1983, between Petrolera and YPF regarding the delivery of propane and butane from the Entre Lomas area, as filed with Form 10-K, No. 0-8933, dated April 12, 1983. -39- 40 *(10) - CONTRACT FOR THE EXPLORATION, EXPLOITATION AND DEVELOPMENT OF THE "ENTRE LOMAS" AREA, dated July 8, 1982 between Yacimientos Petroliferos Fiscales Sociedad Del Estado and Petrolera Perez Companc, Inc. relating to the extension of Contract No. 12,507, as filed with Form 10 -K, No. 0-8933, dated April 12, 1983. *(10) - ADDITIONAL CLAUSE NUMBER 3 dated December 18, 1985, to the agreement between Perez Companc and YPF covering the Entre Lomas area dated March 13, 1968 and attached translation as filed with Form 10-K, No. 0-8933, dated April 11, 1988. *(10) - Agreement between the Joint Committee created by the Ministry of Public Works and Services and the Ministry of Energy, YPF and Petrolera Perez Companc S.A. dated December 26, 1990, constituting the conversion to concession and deregulation of the original Entre Lomas contract number 12,507. (24) - Power of attorney. (27) - Financial data schedule. * Exhibits so marked have heretofore been filed with the Securities and Exchange Commission as part of the filing indicated and are incorporated herein by reference. -40- 41 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. APCO ARGENTINA INC. (Registrant) Dated: March 27, 1997 By: /s/ Thomas Bueno ----------------------------------- Thomas Bueno Attorney-in-Fact Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. /s/ *John C. Bumgarner March 27, 1997 - ---------------------------------------- John C. Bumgarner, Chairman of the Board and Chief Executive Officer /s/ *Jack D. McCarthy March 27, 1997 - ---------------------------------------- Jack D. McCarthy, Vice President and Chief Financial Officer /s/ *Thomas Bueno March 27, 1997 - ---------------------------------------- Thomas Bueno, Controller and Chief Accounting Officer /s/ *John H. Williams March 27, 1997 - ---------------------------------------- John H. Williams, Director /s/ *Keith E. Bailey March 27, 1997 - ---------------------------------------- Keith E. Bailey, Director *By: /s/ THOMAS BUENO March 27, 1997 ------------------------------------ Thomas Bueno, Attorney-in-Fact -41- 42 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 24 - Power of Attorney 27 - Financial Data Schedule
EX-24 2 POWER OF ATTORNEY 1 EXHIBIT 24 APCO ARGENTINA INC. POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each of the undersigned individuals, in his capacity as a director or officer or both, as hereinafter set forth below his signature, of APCO ARGENTINA INC., a Cayman Islands corporation ("Apco"), does hereby constitute and appoint WILLIAM G. VON GLAHN, DAVID M. HIGBEE and THOMAS BUENO his true and lawful attorneys and each of them (with full power to act without the others) his true and lawful attorney for him and in his name and in his capacity as a director or officer or both, of Apco, as hereinafter set forth below his signature, to sign Apco's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 1996, and any and all amendments thereto or all instruments necessary or incidental in connection therewith; and THAT the undersigned Apco does hereby constitute and appoint WILLIAM G. VON GLAHN, DAVID M. HIGBEE and THOMAS BUENO its true and lawful attorneys and each of them (with full power to act without the others) its true and lawful attorney for it and in its name and on its behalf to sign said form 10-K and any and all amendments thereto and any and all instruments necessary or incidental in connection therewith. Each of said attorneys shall have full power of substitution and resubstitution, and said attorneys or any of them, or any substitute appointed by any of them hereunder shall have full power and authority to do and perform in the name and on behalf of each of the undersigned, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully to all intents and purposes as each of the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys or any of them or of any such substitute pursuant hereto. IN WITNESS WHEREOF, the undersigned have executed this instrument, all as of the 19th day of March, 1997. /s/ John C. Bumgarner, Jr. /s/ Jack D. McCarthy - --------------------------- ------------------------ John C. Bumgarner, Jr. Jack D. McCarthy Chairman of the Board, Vice President and President and Chief Financial Officer Chief Executive Officer /s/ Thomas Bueno ------------------------ Thomas Bueno Controller and Chief Accounting Officer 2 Page 2 /s/ Keith E. Bailey /s/ John H. Williams - ---------------------------- --------------------------- Keith E. Bailey John H. Williams Director Director APCO ARGENTINA INC. By: /s/ Jack D. McCarthy ---------------------------- Jack D. McCarthy Vice President ATTEST: /s/ David M. Higbee - --------------------------- David M. Higbee Secretary EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 18,953 0 6,375 0 4,098 29,790 54,891 29,129 55,684 9,718 0 0 0 74 43,504 55,684 45,954 46,765 0 27,079 1,196 0 0 18,490 5,829 12,661 0 0 0 12,661 1.72 1.72
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