<PAGE> 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, 1995
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, 1995
ORDINARY SHARES, $.01 PAR VALUE 7,360,195 SHARES
<PAGE> 2
APCO ARGENTINA INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page No.
---------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -- March 31, 1995 and
December 31, 1994 3
Consolidated Statements of Operations -- Three
Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -- Three
Months Ended March 31, 1995 and 1994 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 10
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in Thousands) March 31, December 31,
1995 1994
--------------- --------------
ASSETS (UNAUDITED)
- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 19,528 $ 19,169
Accounts receivable 5,417 6,039
Inventory 2,071 2,345
Other current assets 313 256
---------- ---------
Total current assets 27,329 27,809
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation of $20,133 and $18,351 in 1995 and
1994, respectively 16,800 16,496
Other assets 37 37
---------- ---------
$ 44,166 $ 44,342
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 2,325 $ 1,978
Accrued liabilities 2,914 2,518
Dividends payable 2,392 2,392
---------- ---------
Total current liabilities 7,631 6,888
Other Liabilities 2,243 2,844
Commitments and Contingencies (Note 2)
Stockholders' Equity:
Ordinary shares, par value $.01 per share;
15,000,000 shares authorized; 7,360,195
shares outstanding 74 74
Additional paid-in capital 9,326 9,326
Retained earnings 24,892 25,210
---------- ---------
Total stockholders' equity 34,292 34,610
---------- ---------
$ 44,166 $ 44,342
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE> 4
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands) Three Months Ended
March 31,
----------------------------
1995 1994
------- -------
<S> <C> <C>
Revenues:
Operating revenue $ 8,491 $ 6,492
Financial and other revenue 242 189
-------- --------
8,733 6,681
Costs and Expenses:
Operating expense 2,930 2,166
Provincial royalties 915 632
Selling and administrative 618 614
Depreciation, depletion and amortization 1,156 213
Exploration expense 54 21
Argentine taxes 891 781
Other (income) expense 95 145
-------- --------
6,659 4,572
-------- --------
Net income $ 2,074 $ 2,109
======== ========
Income per ordinary share $ 0.28 $ 0.29
======== ========
Average ordinary shares and
equivalents outstanding (000's) 7,360 7,360
Dividends declared per ordinary share $ .325 $ .325
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE> 5
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands) Three Months Ended
March 31,
----------------------------
1995 1994
--------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 2,074 $ 2,109
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 1,156 213
Reclassification of plugging and abandonment provision
from other liabilities to accumulated depreciation 626 -
Decrease in accounts receivable 622 5,375
Decrease in inventory 274 32
Increase in other current assets (57) (60)
Increase (decrease) in accounts payable 347 (611)
Increase (decrease) in accrued liabilities 396 (1,883)
Other, including changes in non-current
assets and liabilities (601) -
-------- --------
Net cash provided by operating activities 4,837 5,175
Cash flow from investing activities:
Capital expenditures (2,086) (734)
Cash flow from financing activities:
Dividends paid (2,392) (2,392)
-------- --------
Net increase in cash and cash equivalents 359 2,049
Cash and cash equivalents at beginning of the period 19,169 19,764
-------- --------
Cash and cash equivalents at end of the period $ 19,528 $ 21,813
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 401 $ 1,073
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE> 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 1994
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, 1995
and 1994. 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 64.5 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 3 of Notes
to Consolidated Financial Statements in the Company's 1994 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 $4.3 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 1994 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 percent and is included in
the Consolidated Statements of Operations as Argentine taxes.
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<PAGE> 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
OIL PRODUCTION
The Entre Lomas joint venture has drilled ten development oil wells since the
beginning of 1993 of which six were located in the Entre Lomas field. This
small oil field is exhibiting good development potential and has been the site
of the most productive wells drilled since 1992. The remaining four wells were
drilled in the large Charco Bayo/Piedras Blancas ("CB/PB") field complex.
The joint venture intends to continue the development of the Entre Lomas oil
field. One well is now drilling. A second is scheduled to be drilled before
July 31, the end of the joint venture's current fiscal budget period.
Although the joint venture partners believe the limits of the CB/PB field
complex are fairly well defined, 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. At its current stage of development, drilling in CB/PB is
quite sensitive to oil price fluctuations. Weak prices in late 1993 and early
1994 led to a temporary suspension of drilling. No CB/PB wells have been
drilled since August 1993. The unpredictability of oil prices in today's
political and economic environment requires caution before proceeding.
However, the joint venture partners now believe current prices support
additional drilling and, accordingly, a review of CB/PB development locations
is now underway.
The slow down of development drilling in the Entre Lomas concession over the
recent past has led to insufficient new oil production to replace declines
which normally occur in oil fields over time. Daily oil production during the
first quarter of 1995 averaged 9,428 barrels, compared with an average of 9,750
for all of 1994.
OIL PRICES
Oil sales prices during the first quarter of 1995 averaged $16.53. Since the
end of the quarter, the price of West Texas Intermediate ("WTI"), upon which
Entre Lomas prices are based, surged above $20 raising the sales price of Entre
Lomas oil over $18. In the absence of a sharp drop in the price of WTI, this
increase should have a corresponding effect on the Company's income and cash
flow during the second quarter and possibly expand development drilling
possibilities in CB/PB.
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<PAGE> 8
GAS DEVELOPMENT
The joint venture has completed shooting 3D seismic over a 90 square kilometer
surface rectangle that includes the area of Petrolifera formation gas
development potential. Interpretation of the seismic will be an ongoing
process. However, it has been divided into two phases, with the area of gas
development potential included in the first phase. With the help of seismic
interpretation, a second Petrolifera drilling location to confirm the
production from the Entre Lomas 4 gas well has been selected. The location has
been built and drilling will commence in May.
RESULTS OF OPERATIONS
NET INCOME
The Company generated net income of $2.1 million for both the first quarter
1995 and 1994.
Operating revenues during the current quarter were $2 million higher than the
same period in 1994. Oil sales prices were significantly higher averaging
$16.53 per barrel in 1995 as compared with $12.41 during 1994. In addition,
gas sales were greater due to increased volumes resulting from the success of
gas development activities in the Entre Lomas field during mid 1994. These
favorable affects were primarily offset by increases in operating expense and
depreciation, depletion and amortization expense.
Operating expense increased by $800 thousand. The increase is attributable to
two factors. The Entre Lomas joint venture commenced paying transportation
costs effective March 1, 1994, as required by the settlement reached with YPF,
which settlement is described on page 2 of the Company's 1994 Annual Report on
Form 10-K under "Deregulation". The second factor relates to costs associated
with a polymer injection pilot which was implemented in CB/PB during the current
quarter.
Depreciation, depletion and amortization expense increased by $900 thousand.
This increase was primarily due to amortization expense relating to the cost
associated with obtaining, as part of the settlement with YPF, the right to
sell Entre Lomas gas in the open market. This right went into effect March 1,
1994.
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<PAGE> 9
ENTRE LOMAS
The following table shows sales and price statistics for the Entre Lomas Joint
Venture for the periods indicated based on data supplied to the Company by
Petrolera. The Company's net interest is 47.6 percent.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
March 31, March 31,
1995 1994
-------------- --------------
<S> <C> <C>
Total Sales-Gross
-----------------
Crude Oil and Condensate (bbls) 835,727 921,104
Gas (mcf) 3,039,460 2,445,383
LPG (tons) 3,880 4,483
Total Sales-Net to Company
--------------------------
Crude Oil and Condensate (bbls) 397,806 438,445
Gas (mcf) 1,446,783 1,164,002
LPG (tons) 1,847 2,134
Average Sales Prices (in U.S. Dollars)
--------------------------------------
Oil (per bbl) $ 16.53 $ 12.41
Gas (per mcf) $ 1.11 $ .88
LPG (per ton) $ 162.63 $ 146.78
Average Production Costs (in U.S. Dollars)
------------------------------------------
Oil (per bbl) $ 6.83 $ 5.21
Gas (per mcf) $ .18 $ .10
LPG (per ton) $ 63.40 $ 49.97
</TABLE>
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.
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<PAGE> 10
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
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<PAGE> 11
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
and Chief Accounting Officer
May 10, 1995
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<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000311471
<NAME> APCO ARGENTINA INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 19,528
<SECURITIES> 0
<RECEIVABLES> 5,417
<ALLOWANCES> 0
<INVENTORY> 2,071
<CURRENT-ASSETS> 27,329
<PP&E> 36,933
<DEPRECIATION> 20,133
<TOTAL-ASSETS> 44,166
<CURRENT-LIABILITIES> 7,631
<BONDS> 0
<COMMON> 74
0
0
<OTHER-SE> 34,218
<TOTAL-LIABILITY-AND-EQUITY> 44,166
<SALES> 8,491
<TOTAL-REVENUES> 8,733
<CGS> 0
<TOTAL-COSTS> 5,619
<OTHER-EXPENSES> 268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,846
<INCOME-TAX> 772
<INCOME-CONTINUING> 2,074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,074
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
