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Previous: NOVAMETRIX MEDICAL SYSTEMS INC, DEFA14A, 1996-11-07 |
Next: COMPUTER DEVICES INC /MD, 10QSB, 1996-11-07 |
<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 NINE MONTHS ENDED SEPTEMBER 30, 1996
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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
POST OFFICE BOX 2400 (M.D. 39-6)
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 OCTOBER 27, 1996
ORDINARY SHARES, $.01 PAR VALUE 7,360,311 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 -- September 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations -- Three and
Nine Months Ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -- Nine
Months Ended September 30, 1996 and 1995 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>
Portions of this document may constitute "forward-looking statements" as
defined by federal law. Although Apco Argentina Inc. believes any such
statements are based on reasonable assumptions, there is no assurance that
actual outcomes will not be materially different. Additional information about
issues that could lead to material changes in performance is contained in Apco
Argentina Inc's annual report on Form 10-K
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -------------
ASSETS (UNAUDITED)
- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 17,856 $ 17,244
Accounts receivable 7,599 5,699
Inventory 2,803 2,480
Other current assets 467 217
---------- ---------
Total current assets 28,725 25,640
---------- ---------
Property and Equipment:
Cost 53,111 44,406
Accumulated depreciation (27,766) (23,601)
---------- ---------
25,345 20,805
Other assets 131 53
---------- ---------
$ 54,201 $ 46,498
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 2,610 $ 3,922
Accrued liabilities 6,049 3,306
Dividends payable 1,196 1,196
---------- ---------
Total current liabilities 9,855 8,424
---------- ---------
Other Liabilities 2,699 2,372
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 32,247 26,302
---------- ---------
Total stockholders' equity 41,647 35,702
---------- ---------
$ 54,201 $ 46,498
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-3-
<PAGE> 4
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
(DOLLARS IN THOUSANDS) SEPTEMBER, 30 SEPTEMBER, 30
------------------------ --------------------------
1996 1995 1996 1995
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Operating revenues $ 11,140 $ 9,622 $ 33,246 $ 27,249
Financial and other revenue 205 262 568 811
---------- ----------- ---------- ----------
11,345 9,884 33,814 28,060
---------- ----------- ---------- ----------
Costs and Expenses:
Operating expense 3,340 3,317 10,106 9,312
Provincial royalties 1,378 919 3,723 2,838
Selling and administrative 492 546 1,609 1,837
Depreciation, depletion, and amortization 1,632 966 4,209 3,491
Exploration expense 55 561 708 1,375
Argentine taxes 1,592 1,129 4,376 2,986
Other (income) expense (522) 125 (450) 110
---------- ----------- ---------- ----------
7,967 7,563 24,281 21,949
---------- ----------- ---------- ----------
Net income $ 3,378 $ 2,321 $ 9,533 $ 6,111
========== =========== ========== ==========
Income per ordinary share $ .46 $ .32 $ 1.30 $ .83
========== =========== ========== ==========
Average ordinary shares and
equivalents outstanding (000's) 7,360 7,360 7 ,360 7,360
========== =========== ========== ==========
Dividends declared per ordinary share $ .1625 $ .1625 $ . 4875 $ .8125
========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-4-
<PAGE> 5
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------------------
1996 1995
--------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flow from operating activities:
Net income $ 9,533 $ 6,111
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 4,209 3,491
Well abandonment charges 496 502
Reclassification of plugging and abandonment provision
from other liabilities to accumulated depreciation - 626
Changes in accounts receivable (1,900) (1,325)
Changes in inventory (323) 50
Changes in other current assets (250) (46)
Changes in accounts payable (1,312) 1,271
Changes in accrued liabilities 2,743 1,754
Other, including changes in non-current
assets and liabilities 249 (525)
--------- ----------
Net cash provided by operating activities 13,445 11,909
Cash flow from investing activities:
Capital expenditures (9,245) (5,684)
Cash flow from financing activities:
Dividends paid (3,588) (7,176)
---------- ---------
Net increase (decrease) in cash and cash equivalents 612 (951)
Cash and cash equivalents at beginning of the period 17,244 19,169
--------- ---------
Cash and cash equivalents at end of the period $ 17,856 $ 18,218
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 2,457 $ 1,934
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-5-
<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 1995
Form 10-K.
In the opinion of the Company, all adjustments have been made to
present fairly the results of the three months and nine months ended
September 30, 1996 and 1995. 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 1995 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 $2.5 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 1995 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.
-6-
<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
During 1996, the Company has benefited significantly from increased oil prices
and increased gas sales.
For the nine months ended September 30, per barrel oil sales prices averaged
$19.97 compared with $16.65 for the comparable period in 1995. The per barrel
sales price for the current quarter averaged $21.27.
In the Entre Lomas concession, gas sales volumes increased during the year due
to continued success of ongoing gas development efforts in the new Entre Lomas
gas field. Although the partners have not as yet entered into a long term gas
sales contract for this new gas, during Argentina's winter season, the joint
venturers were able to increase gas production and sell gas at levels near the
70 million cubic feet per day ("mmcf/d") handling capacity of the concession's
installations. Through the nine months ended September 30, the Entre Lomas
joint venturers sold 14.1 billion cubic feet ("bcf") of gas (6.7 bcf net to
Apco), as compared with 9.7 bcf (4.6 bcf net to Apco) for the comparable period
in 1995. With the advent of spring and warmer temperatures in Argentina, Entre
Lomas sales are now averaging 49 mmcf/d (23 mmcf/d net to Apco).
It is the intention of the Entre Lomas partners to continue their efforts to
develop more gas reserves in this new field over the foreseeable future. The
success of these efforts will ultimately be determined by the outcome of future
development drilling. At this time, the seven existing wells are on production
and under observation to determine the behavior of reservoir pressures.
It is uncertain if the pattern of increased oil prices experienced this year
will continue. Prices could stabilize at current levels or fall in the near
term. Each scenario would have its corresponding affect on the company's
earnings for the balance of this year. 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.
Although capital spending for the nine months reached $9.3 million, or almost
twice the prior year's level, the positive factors described herein have
enabled the Company to receive in excess of $5 million in distributions and
dividends from the Entre Lomas joint venture during 1996. The significant
increase in capital spending is the result of the joint venture's decision,
implemented midway through 1995, to increase investment levels in the
concession for the foreseeable future.
-7-
<PAGE> 8
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1996, the Company generated
net income of $3.4 million and $9.5 million, respectively. This compares with
$2.3 million and $6.1 million for the same periods in 1995.
The increase in net income for both periods is due almost entirely to increased
oil sales prices and increased gas sales volumes discussed previously under
"Financial Condition". The effect of these two factors is evidenced in the
increases in operating revenues, provincial royalties and income taxes.
The increases in depreciation, depletion and amortization for both the three
and nine months is primarily due to adjustments made during the third quarter
to incorporate recent investments related to the development of the new Entre
Lomas gas field and associated facilities and internal gas pipelines.
-8-
<PAGE> 9
ENTRE LOMAS
The following table shows volume, price and production cost 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>
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
-------------- ----------------
<S> <C> <C>
Total Sales Volumes-Gross
-------------------------
Crude Oil and Condensate (bbls) 2,450,867 2,622,905
Gas (mcf) 14,090,933 9,704,141
LPG (tons) 11,073 12,280
Total Sales Volumes-Net to Company
----------------------------------
Crude Oil and Condensate (bbls) 1,166,612 1,248,503
Gas (mcf) 6,707,284 4,619,171
LPG (tons) 5,271 5,845
Average Sales Prices (in U.S. Dollars)
--------------------------------------
Oil (per bbl) $ 19.97 $ 16.65
Gas (per mcf) $ 1.34 $ 1.18
LPG (per ton) $ 176.47 $ 170.60
Average Production Costs (in U.S. Dollars)
------------------------------------------
Oil (per bbl) $ 8.25 $ 7.28
Gas (per mcf) $ .19 $ .17
LPG (per ton) $ 76.94 $ 63.93
</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.
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.
-9-
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual General Meeting of Shareholders of the Company was
held on September 17, 1996. At the Annual General Meeting, one
individual was elected as a director of the Company. Two
individuals continue to serve as directors pursuant to their
prior election. In addition, the appointment of Arthur Andersen
LLP as the independent auditor of the Company for 1996 was
ratified.
A tabulation of the voting at the Annual Meeting with respect to
the matters indicated is as follows:
Election of Directors:
<TABLE>
<CAPTION>
Name For Against Withheld
---- --- ------- --------
<S> <C> <C> <C>
John H. Williams 6,891,213 None 44,044
</TABLE>
Ratification of Appointment of Independent Auditor:
<TABLE>
<CAPTION>
Name For Against Abstain
---- --- ------- -------
<S> <C> <C> <C>
Arthur Andersen LLP 6,930,966 2,830 1,461
</TABLE>
The Company understands that there were no broker nonvotes with
respect to either the election of the director or the
ratification of the auditor.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
-10-
<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
of the Registrant) and
Chief Accounting Officer
November 7, 1996
-11-
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 17,856
<SECURITIES> 0
<RECEIVABLES> 7,599
<ALLOWANCES> 0
<INVENTORY> 2,803
<CURRENT-ASSETS> 28,725
<PP&E> 53,111
<DEPRECIATION> 27,766
<TOTAL-ASSETS> 54,201
<CURRENT-LIABILITIES> 9,855
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 41,573
<TOTAL-LIABILITY-AND-EQUITY> 54,201
<SALES> 33,246
<TOTAL-REVENUES> 33,814
<CGS> 0
<TOTAL-COSTS> 19,647
<OTHER-EXPENSES> 739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,428
<INCOME-TAX> 3,895
<INCOME-CONTINUING> 9,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,533
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
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