<PAGE> 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
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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:
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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.
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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.
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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.
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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.
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<PAGE> 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
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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
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<PAGE> 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)
<TABLE>
<CAPTION>
Total proved oil, condensate and (Millions of Barrels)
plant product reserves 1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Total proved gas reserves (Billions of cubic feet)
--------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
There were no estimates of total proved net oil or gas reserves filed
with any other United States Federal authority or agency during 1996.
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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)
<TABLE>
<CAPTION>
(Millions of U.S. Dollars)
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
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
====== ====== ======
</TABLE>
(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.
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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)
<TABLE>
<CAPTION>
(Millions of U.S. Dollars)
--------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C>
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
====== ====== ======
</TABLE>
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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
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
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
</TABLE>
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.
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Total wells from all acreage in which the Company has an interest for
the years ended December 31, 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
Gross Net Gross Net
----- ---- ----- ----
<S> <C> <C> <C> <C>
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
==== ==== ==== ====
</TABLE>
The following table details total investments made by the Entre Lomas
partners and net to the Company's 47.6% interest.
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
Gross Net Gross Net Gross Net
------ ------ ------ ------ ------ ------
(US $ Millions)
<S> <C> <C> <C> <C> <C> <C>
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
====== ====== ====== ====== ====== ======
</TABLE>
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).
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<PAGE> 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:
<TABLE>
<CAPTION>
(Thousands of U.S. Dollars)
--------------------------
1996 1995
--------- ---------
<S> <C> <C>
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
========= =========
</TABLE>
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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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.
<TABLE>
<CAPTION>
Stock Price
---------------------
High Low Dividend
---- ---- --------
<S> <C> <C> <C> <C>
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
</TABLE>
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-
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(Dollars in thousands
except per share amounts)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
-18-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
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-
<PAGE> 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-
<PAGE> 24
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Amounts in Thousands) December 31,
--------------------
1996 1995
-------- --------
<S> <C> <C>
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
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-24-
<PAGE> 25
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Amounts in Thousands Except Per Share) For the Years Ended December 31,
-------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-25-
<PAGE> 26
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Amounts in Thousands) Additional
Ordinary Shares Paid-in Retained
Shares Amount Capital Earnings
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-26-
<PAGE> 27
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(Amounts in Thousands)
<S> <C> <C> <C>
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
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-27-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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.
<TABLE>
<CAPTION>
Principal
-------------------
1996 1995
-------- --------
<S> <C> <C>
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
======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
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%
</TABLE>
* Less than 10 percent
-31-
<PAGE> 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.
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Income taxes $ 5,830 $ 3,460 $ 2,704
Other taxes 732 586 428
-------- -------- --------
$ 6,562 $ 4,046 $ 3,132
======== ======== ========
</TABLE>
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-
<PAGE> 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-
<PAGE> 34
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(10) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
(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
</TABLE>
-34-
<PAGE> 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
<TABLE>
<CAPTION>
Director's
Term of
Director Office
Name Age Position Since Expires
--------------- --- ------------------------ ----- -------
<S> <C> <C> <C>
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
</TABLE>
(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.
<TABLE>
<CAPTION>
Director
Name Age Position Since
--------------- --- -------------------- -----
<S> <C> <C> <C>
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
</TABLE>
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
None.
-35-
<PAGE> 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-
<PAGE> 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
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Name and Address of Ownership of
Title of Class Beneficial Owner (Note 1) Class
------------------ ---------------------------------- ----------- ------
<S> <C> <C> <C>
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
</TABLE>
(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-
<PAGE> 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
<TABLE>
<CAPTION>
Exhibit
Number
--------
<S> <C>
*(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.
</TABLE>
-38-
<PAGE> 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-
<PAGE> 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-
<PAGE> 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-
<PAGE> 42
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
24 - Power of Attorney
27 - Financial Data Schedule
</TABLE>
<PAGE> 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
<PAGE> 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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,953
<SECURITIES> 0
<RECEIVABLES> 6,375
<ALLOWANCES> 0
<INVENTORY> 4,098
<CURRENT-ASSETS> 29,790
<PP&E> 54,891
<DEPRECIATION> 29,129
<TOTAL-ASSETS> 55,684
<CURRENT-LIABILITIES> 9,718
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 43,504
<TOTAL-LIABILITY-AND-EQUITY> 55,684
<SALES> 45,954
<TOTAL-REVENUES> 46,765
<CGS> 0
<TOTAL-COSTS> 27,079
<OTHER-EXPENSES> 1,196
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,490
<INCOME-TAX> 5,829
<INCOME-CONTINUING> 12,661
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,661
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.72
</TABLE>
