-----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, SjLD8myNZH+GPRaMnM5D7RJtE3OuxXBlsOLA+nis1PJw3RX/AhJ1z76Qaebng5i7 HbDLz8VIyFvhsxNJyjbsGw== 0000950134-97-003669.txt : 19970513 0000950134-97-003669.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950134-97-003669 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08933 FILM NUMBER: 97601188 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-Q 1 FORM 10-Q FOR QUARTER ENDING MARCH 31, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE THREE MONTHS ENDED MARCH 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM TO ------ ------ COMMISSION FILE NUMBER 0-8933 APCO ARGENTINA INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CAYMAN ISLANDS -- (STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION) POST OFFICE BOX 2400 TULSA, OKLAHOMA 74102 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER: (918) 588-2164 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 THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK AS OF THE LATEST PRACTICABLE DATE. CLASS OUTSTANDING AT APRIL 30, 1997 ORDINARY SHARES, $.01 PAR VALUE 7,360,311 SHARES 2 APCO ARGENTINA INC. AND SUBSIDIARY INDEX Page No. -------- PART I. FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets -- March 31, 1997 and December 31, 1996 3 Consolidated Statements of Operations -- Three Months Ended March 31, 1997 and 1996 4 Consolidated Statements of Cash Flows -- Three Months Ended March 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7 PART II. OTHER INFORMATION 9 -2- 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS APCO ARGENTINA INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands) March 31, December 31, 1997 1996 ----------- ------------ ASSETS (UNAUDITED) Current Assets: Cash and cash equivalents $ 22,469 $ 18,953 Accounts receivable 6,157 6,375 Inventory 3,223 4,098 Other current assets 518 364 -------- -------- Total current assets 32,367 29,790 Property and Equipment: Cost 57,790 54,891 Accumulated depreciation (30,319) (29,129) -------- -------- 27,471 25,762 Other assets 133 132 -------- -------- $ 59,971 $ 55,684 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 3,670 $ 2,835 Accrued liabilities 6,555 5,687 Dividends payable 1,196 1,196 -------- -------- Total current liabilities 11,421 9,718 Other Liabilities 2,401 2,388 Commitments and Contingencies (Note 2) 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 36,749 34,178 -------- -------- Total stockholders' equity 46,149 43,578 -------- -------- $ 59,971 $ 55,684 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. -3- 4 APCO ARGENTINA INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in Thousands) Three Months Ended March 31, ---------------------- 1997 1996 ------- ------- Revenues: Operating revenue $12,747 $ 9,176 Financial and other revenue 231 189 ------- ------- 12,978 9,365 Costs and Expenses: Operating expense 3,671 3,129 Provincial royalties 1,214 1,056 Selling and administrative 490 618 Depreciation, depletion and amortization 1,190 1,338 Exploration expense 60 76 Argentine taxes 2,064 1,051 Other (income) expense 522 (228) ------- ------- 9,211 7,040 ------- ------- Net income $ 3,767 $ 2,325 ======= ======= Income per ordinary share $ .51 $ .32 ======= ======= Average ordinary shares and equivalents outstanding (000's) 7,360 7,360 ======= ======= Dividends declared per ordinary share $ .1625 $ .1625 ======= =======
The accompanying notes are an integral part of these consolidated statements. -4- 5 APCO ARGENTINA INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands) Three Months Ended March 31, -------------------------- 1996 1995 ------- ------- Cash flow from operating activities: Net income $ 3,767 $ 2,325 Adjustments to reconcile to cash provided by operating activities: Depreciation, depletion and amortization 1,190 1,338 Decrease (increase) in accounts receivable 218 (144) Decrease (increase) in inventory 875 (673) Increase in other current assets (154) (198) Increase (decrease) in accounts payable 835 (188) Increase in accrued liabilities 868 186 Other, including changes in non-current assets and liabilities 12 (35) ------- ------- Net cash provided by operating activities 7,611 2,611 Cash flow from investing activities: Capital expenditures (2,899) (4,496) Cash flow from financing activities: Dividends paid (1,196) (1,196) ------- ------- Net (decrease) increase in cash and cash equivalents 3,516 (3,081) Cash and cash equivalents at beginning of the period 18,953 17,244 ------- ------- Cash and cash equivalents at end of the period $22,469 $14,163 ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 1,064 $ 776
The accompanying notes are an integral part of these consolidated statements. -5- 6 APCO ARGENTINA INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) GENERAL The unaudited, consolidated financial statements of Apco Argentina Inc. and subsidiary (the "Company"), included herein, do not include all footnote disclosures normally included in annual financial statements and, therefore, should be read in conjunction with the financial statements and notes thereto included in the Company's 1996 Form 10-K. In the opinion of the Company, all adjustments have been made to present fairly the results of the three months ended March 31, 1997 and 1996. The results for the periods presented are not necessarily indicative of the results for the respective complete years. (2) LOAN GUARANTEE The Williams Companies, Inc. ("Williams") owns 67.1 percent of the Company's common stock and is the parent of Northwest Argentina Corporation, which, along with the Company, is a participant in the Acambuco joint venture in Argentina. As discussed in Note 2 of Notes to Consolidated Financial Statements in the Company's 1996 Form 10-K, Williams has guaranteed a $7.9 million bank loan to Bridas S.A., an affiliate of Bridas, S.A.P.I.C. ("Bridas"), another participant in the joint venture. 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 $1.9 million. Inasmuch as the guarantee directly benefits the Company on an equal basis with Northwest Argentina, the Company and Northwest Argentina have agreed that should Bridas S.A. default in its obligation to the U.S. bank, the Company and Northwest Argentina will each pay Williams one-half of any amounts it pays as a result of such default. No provision has been established by the Company with respect to this contingent liability as management has no reason to believe that Bridas will not meet its obligation to the bank. (3) INCOME TAXES As described in Note 7 of Notes to Consolidated Financial Statements included in the Company's 1996 Form 10-K, the Company believes its earnings are not subject to U.S. income taxes, nor Cayman Islands income or corporation taxes. Income derived by the Company from its Argentine operations is subject to Argentine income tax at a rate of thirty three percent which tax is included in the Consolidated Statements of Operations as Argentine taxes. As described in Note 8 to Consolidated Financial Statements included in the Company's 1996 Form 10-K, in 1988, the Argentine Government amended the Obligatory Savings Law requiring that all taxpayers deposit with the government, both for 1988 and 1989, amounts computed on the basis of prior year taxable incomes. The deposits were to be repaid after five years and earn interest at the rate stipulated by the law. It was the opinion of the joint venture and its 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 Petrolera for the delinquent deposits pertaining to the Entre Lomas operation, which including interest and indexation for inflation, amounts to $9.2 million. Petrolera appealed the DGI's claim in Federal Tax Court. In April 1997, the court ruled in favor of the DGI. Petrolera will now appeal the ruling before Federal Appeals Court. In the opinion of Petrolera's management and its legal and tax counsel, the possibility that this claim will result in an unfavorable outcome for the joint venture continues to be remote. The company has no reason to believe otherwise, and accordingly, has not recorded a liability for its share of the asserted claim. -6- 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion explains the significant factors which have affected the Company's financial condition and results of operations during the periods covered by this report. FINANCIAL CONDITION During the current quarter the Company's net income and cash flow from operations have benefited significantly from increases in oil prices and oil production. OIL PRICES The price of West Texas Intermediate oil, the reference crude upon which oil prices in Argentina are based, increased significantly during 1996 resulting in a favorable impact on the price of the Company's crude oil. Since 1991, when deregulation of Argentina's energy industry was implemented, the average per barrel sales price of Entre Lomas crude has ranged from $15 to $17. The increase in 1996 resulted in an average sales price for that year of $20.87, with the current reporting quarter averaging $21.49 per barrel. Prices peaked in December 1996 and January of this year, but have fallen throughout the remainder of the current quarter and into April. Due to their unpredictable nature, it is uncertain how oil prices will behave for the balance of this year. Prices are affected by multiple factors which include among other, worldwide production and demand, inventory levels, weather, and political factors in the middle east and other oil producing regions. OIL PRODUCTION 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 increasing average daily oil production from 9,300 barrels during the first quarter of 1996 to 10,700, the current quarter's average. Additional wells to extend the development of this field will be drilled in 1997. RESULTS OF OPERATIONS For the three months ended March 31, 1997, the Company generated net income of $3.7 million, as compared with $2.3 million for the same period in 1996. This increase in net income is due primarily to increased oil sales attributable to the factors described previously under "Financial Condition". Higher sales were partially offset by a charge related to reduction of crude oil inventories during the quarter and higher Argentine income taxes resulting directly from the Company's increased net income. The explanation for the inventory fluctuation charge is as follows. When product inventories build, the cost of producing oil which is accumulating is recorded as inventory, with an offsetting credit to an inventory fluctuation account. As inventories diminish and sales are recorded, as was the case during the current quarter, the cost of inventory sold is charged to the inventory fluctuation account. Inventories were building during the first quarter of 1996. -7- 8 ENTRE LOMAS The following table shows volume, price and production cost statistics for the Entre Lomas Concession for the periods indicated. The Company's net interest is 47.6 percent.
Three Months Ended --------------------------- March 31, March 31, 1997 1996 --------- --------- Total Sales Volumes-Gross ------------------------- Crude Oil and Condensate (bbls) 1,027,965 765,328 Gas (mcf) 3,054,793 3,606,970 LPG (tons) 3,184 3,607 Total Sales Volumes-Net to Company ---------------------------------- Crude Oil and Condensate (bbls) 489,311 364,296 Gas (mcf) 1,454,081 1,716,918 LPG (tons) 1,516 1,717 Average Sales Prices (in U.S. Dollars) -------------------------------------- Oil (per bbl) $ 21.49 $ 18.58 Gas (per mcf) $ 1.29 $ 1.24 LPG (per ton) $ 227.39 $ 161.63 Average Production Costs (in U.S. Dollars) ------------------------------------------ Oil (per bbl) $ 7.94 $ 7.72 Gas (per mcf) $ .29 $ .20 LPG (per ton) $ 101.13 $ 77.90
Although oil sales volumes for the current quarter increased by 34 percent over the previous year, a large part of the increase is attributable to normal fluctuations in crude oil inventory. Actual oil production for the current quarter was 966,940 barrels gross, (460,263 barrels net), as compared with 844,908 barrels gross, (402,176 barrels net), for the previous year, representing a 14 percent increase in production volumes. Volumes presented in the above table represent those sold to joint venture customers and do not consider provincial royalties, which are paid separately and are accounted for as an expense by the joint venture. In calculating provincial royalties to be paid, the joint venture is entitled to deduct gathering, storage, treating and compression costs. Average production cost is calculated by taking into consideration all costs of finding hydrocarbons and operating in the Entre Lomas concession, including costs of remedial workovers and depreciation of property and equipment. -8- 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: None -9- 10 SIGNATURE Pursuant to the requirements 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 ------------------------------ Controller, (Duly Authorized Officer of the Registrant) and Chief Accounting Officer May 9, 1997 -10- 11 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 22,469 0 6,157 0 3,223 32,367 57,790 30,319 59,971 11,421 0 0 0 74 46,075 59,971 12,747 12,978 0 6,565 822 0 0 5,591 1,824 3,767 0 0 0 3,767 .51 .51
-----END PRIVACY-ENHANCED MESSAGE-----