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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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
For the transition period from ______________ to ____________
Commission file number 0-8933
APCO ARGENTINA INC.
(Exact name of registrant as specified in its charter)
CAYMAN ISLANDS _
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. BOX 2400
TULSA, OKLAHOMA 74102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 588-2164
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
None None
Securities registered pursuant to Section 12(g) of the Act:
ORDINARY SHARES $.01 PAR VALUE (TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [x]
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant on March 20, 1998, was $68,547,390. This
value was calculated based upon the average bid and asked prices of the
registrant's stock of $30 on March 20, 1998, 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 20, 1998 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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PART 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 the
provinces of Rio Negro and Neuquen in southwest Argentina. The Company also
owns a 1.5 percent participation in a joint venture engaged in oil and gas
exploration and development in the Acambuco concession located in the province
of Salta in northwest Argentina, and a 45 percent participation in a third
joint venture engaged in oil exploration and development in the Canadon Ramirez
concession located in the province of Chubut in southern 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. ("Perez Companc"). 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 southwest 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"), then the 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 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. 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.
During 1997, seven percent of Entre Lomas oil sold was exported to Petrobras,
the Brazilian national oil company. The remainder was sold domestically to
Refineria San Lorenzo S.A. and Shell C.A.P.S.A. under four one year contracts
expiring on different dates in 1998.
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.
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 $1.26 as compared with $1.32 for
contracts in effect in 1996, and $1.60 for contracts in effect in 1995. Market
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conditions have evolved in Argentina to the point that the discount for oil
sold in country appears to have found its point of equilibrium. The discount
should remain at approximately this level for the foreseeable future.
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 1997, 26 million cubic feet per day were
sold under this contract at an average price of $1.30 per thousand cubic feet
("mcf"). The term of the contract is five years.
Total gas sales volume for 1997 averaged 44 million cubic feet per day. The
additional 18 million cubic feet per day above the volume committed to Litoral
Gas S.A. are spot market sales to Metrogas S.A., and Camuzzi Gas Pampeana S.A.
The Entre Lomas partners have been successful selling additional gas production
through temporary arrangements. The concession is well situated in the Neuquen
basis with two major gas pipelines, in close proximity, that feed the Buenos
Aires market. In 1997 the average sales price of gas sold to Metrogas and
Camuzzi was $1.41 per mcf.
TRANSPORTATION
Oil produced in the Entre Lomas concession is sold in Puerto Rosales, a major
industrial port in southern Buenos Aires Province, and is shipped there 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 100 percent of capacity.
The cost to transport oil through this system and use the storage and handling
facilities in Puerto Rosales averaged $1.14 per barrel in 1997. Current
transportation tariffs were established by government decree in 1992.
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.
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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 1997, the Company received direct distributions of $7.5 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.
DESCRIPTION OF THE CONCESSION
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. In 1996 the well Borde Mocho x-1, located southwest
of CB/PB, discovered oil in a small structure yet to be developed.
The largest oil producing formation is called Tordillo which in the CB/PB field
has generated 85 percent 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 416
wells have been drilled in the concession, of which at year end, 279 are oil
wells, 18 are gas wells, and 96 are water injection wells.
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.
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 73 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.
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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 37
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.
In 1992, the Argentine Department of Energy issued Resolution 105 requiring
environmental control. As a result, from 1993 through 1997, investments have
been made to change the system of produced water disposal in the Entre Lomas
concession. Untill now fresh water was the sole source of injection in both
waterflood projects in the concession and produced water was disposed of in
evaporation and filtration pits. Commencing 1996, produced water in CB/PB is
being reinjected into the producing formation. 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.
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
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. Potential for further expansion of the waterflood may also
exist.
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ENTRE LOMAS FIELDS
The Entre Lomas structure is located in the central part of the concession to
the northwest of CB/PB. This anticline is cut by a fault near its crest. An
oil field exists on the southwest or 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 late 1996 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 were
largely responsible for raising oil production in the concession from
approximately 9,000 per day in early 1996, to greater than 11,000 barrels per
day by early 1997. Development drilling to determine the extent of Quintuco
development to the west and northwest continued in 1997. The last three wells
drilled in this field during 1997 were productive, but they did not find the
same channel sands with the excellent petrophysical quality encountered in the
above described four wells. Additional wells are scheduled for 1998.
The southeast, or older part of this field has shown signs of pressure
depletion. The Quintuco formation responded favorably to water flooding in the
El Caracol field. Reservoir simulation studies have predicted that the Entre
Lomas field will have a similar response to secondary recovery. Investments to
implement waterflooding in this field commenced in 1997. First injection is
scheduled for early 1998.
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. 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. Seven wells have
since been drilled, of which five are productive. Although this field now
appears to have been defined, additional expansion possibilities may still
exist to the northwest. Late in 1997, the Lomas de Ocampo 4 well , drilled to
the northwest of the existing field, tested gas in both the Petrolifera and
Quintuco formations. Studies are now being conducted to determine potential in
this expansion area.
EXPLORATION
In the Entre Lomas concession there are approximately 149,000 acres not in
production. Since inception, 416 wells have been
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drilled inside the concession 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.
During 1993 and 1994, the partners carried out a seismic program which included
reprocessing seismic shot in prior years and shooting approximately 480
kilometers 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. This was followed up with 3D seismic over 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 the acreage immediately to the
northwest and southeast of the Entre Lomas oil and gas fields. Results of this
3D seismic campaign proved helpful in the efficient development of the Entre
Lomas gas field and the current northwestern extension of the Entre Lomas oil
field. Also, as a result of this program, the joint venture is 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.
During 1998, the joint venture partners plan to cover the remainder of the
concession with 353 square kilometers of 3D seismic in order to provide a
clearer understanding of the prospective regions of the concession identified
with the previous 2D seismic campaign. This seismic will cover the large CB/PB
field complex where a principal objective is the identification of oil and gas
accumulations in the lower section of the Petrolifera formation.
BORDE MOCHO
In early 1996, the joint venture drilled the Borde Mocho x-1 well. This
exploration well was completed in both the Quintuco and Tordillo formations.
Its performance to date reveals a potential for development of the surrounding
area. After completion of the aforementioned 3D seismic campaign, which will
also cover this area, additional wells will be drilled to better define the
production potential of this structure.
ACAMBUCO
The Company owns a 1.5 percent 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.
DESCRIPTION OF THE CONCESSION
The Company has been a participant in the Acambuco area since 1981. The
principal objectives in Acambuco are the Huamampampa and Santa Rosa formations,
deep fractured limestones considered to have sizable gas exploration potential.
In Acambuco, these formations occur at depths in excess of 14,000 feet. The
Ramos and Aguarague concessions, immediately to the south and east of Acambuco,
contain major gas fields with significant gas production
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and reserves from these formations. Acambuco also contains potential for oil
development in shallower formations considered secondary targets.
Acambuco is situated in an overthrust belt wherein drilling can be difficult
and costly not only because of the depths of the primary objectives, but also
from the risk of mechanical problems during drilling.
BACKGROUND
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.
Little activity occurred in Acambuco between 1983 and 1994 due to a lack of
market for potential gas. During the early to mid 1990's, the rapid growth of
demand for energy in southern Brazil generated significant interest in the
construction of pipelines to deliver gas from Bolivian and Northwest Argentine
gas producing basins to the markets of Sao Paulo and Rio de Janeiro. Due to
deregulation of the gas industry in Argentina in 1991, and as major pipeline
alternatives to Brazilian markets began to take shape, interest in the Acambuco
area was rekindled.
In 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 percent interest in the concession in exchange
for drilling, within five years, four exploration wells on four separate
geologic structures, the costs of which were to be paid 100 percent by YPF.
The agreement also provided that YPF would finance development drilling which
might result from successful exploration. The Company had the option, in each
exploration prospect drilled, to either proportionately reduce its 1.5 percent
interest by 45 percent; 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 percent interest.
Pursuant to the terms of the farmout agreement, the San Pedrito x-1 well, with
a target depth of 15,700 feet commenced drilling in March 1995. Due to
mechanical problems, drilling was stopped at a depth 14,500 feet and the well
penetrated only the uppermost section of the Huamampampa formation. Although
not traversing the formation completely, the well successfully tested 42
million cubic feet per day, and 1,900 barrels per day of condensate. For this
initial well, the Company exercised its non-consent option. The total cost of
the well 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 second exploration well, the San
Antonio x-1, on a separate structure. One year later, the well reached its
intended depth of 15,700 feet at a cost of $36 million. The Company again
exercised its non-consent option. The well penetrated the Huamampampa
formation in a structurally unfavorable position and produced water. However,
this well tested oil in a secondary target, the Tupambi formation. Confirmation
of oil potential in the Tupambi is now a primary objective in this structure.
The Huamampampa formation is still considered prospective.
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As a result of the final outcome of the San Pedrito x-1 well, a dispute arose
between Bridas and YPF regarding the well's failure to reach its objective
depth. Before the dispute was resolved, Bridas and Amoco Argentina S.A. formed
a strategic alliance by combining certain of each Company's oil and gas assets
in the southern cone of South America. In the combination Pan American Energy
Investments Ltd. was formed to hold the combined assets. Bridas' interest in
Acambuco is now held by Bridas P.I.C.S.R.L., a wholly owned subsidiary of Pan
American.
In January 1998, the aforementioned dispute between Bridas and YPF was settled.
As part of the settlement, YPF assigned to O&G Developments Ltd., a wholly
owned subsidiary of Bridas P.I.C.S.R.L., 22.5 percent of the 45 percent
interest it had acquired in the 1994 farmout agreement, in exchange for
cancellation of YPF's remaining obligation to drill the last two wells of its
four well drilling commitment. Bridas P.I.C.S.R.L became the operator of the
concession.
FUTURE ACTIVITY
During 1998, the joint venture plans to conduct an extended test of the San
Petrito x-1 well and drill a development well on the structure. The joint
venture also plans to reenter the Macueta x-1002 well, one of the three wells
originally drilled in the early 1980's, and drill horizontally to a higher
position in the Macueta structure. Recent seismic interpretations have
revealed that this well was drilled on the flank of the Macueta structure.
Plans are also underway to begin drilling an exploration well on the largest
structure in the concession toward the end of 1998, or early 1999.
CANADON RAMIREZ
On September 30, 1997, in exchange for its commitment to pay $1.75 million for
exploration and well workovers, the Company acquired a 45 percent interest in
the 92,000 acre Canadon Ramirez concession, located in southern Argentina, in
Chubut province. This region produces hydrocarbons from the Golfo San Jorge
basin, the oldest oil producing province in the country.
The Company obtained its interest in Canadon Ramirez from Pan Am Group S.A.
("Pan Am"), owned by the Melhem family in Argentina. Pan Am previously
purchased the concession from Chubut province, which had acquired it from YPF.
A third partner in the concession is ROCH S.A. which holds a 10 percent
interest and is operator.
During the 1980's YPF drilled eighteen wells in Canadon Ramirez, with several
giving evidence of potential oil production. No production operations have
ever been conducted in the area. The joint venture partners believe that by
applying new and advanced technology not previously tried by YPF, oil can be
found in Canadon Ramirez in commercial quantities. The investment program
currently underway includes well workovers and recompletions, reprocessing and
reinterpretation of existing seismic, and exploration drilling. Objective
formations in the area are fairly shallow and occur at depths of less than
6,000 feet. This concession is considered exploratory in nature. To date the
joint venture has worked over and stimulated four wells of which three have
yielded positive results. The wells are scheduled to start extended production
tests during the month of March.
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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. In April 1991, the convertibility law was
implemented 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 1 percent in
1997 and, second, an influx of foreign investment capital into the country. In
July 1996, Domingo Cavallo, Economy Minister and author of the convertibility
plan, was replaced by Roque Fernandez, formerly president of the Central Bank.
The country's economy showed no adverse reactions to this replacement.
The Asian financial crisis which manifested itself in mid 1997 and continues
today, has impacted the economies of many emerging market countries. Argentina
was not affected significantly. The only result has been a modest slow down in
economic growth. Argentina is now a part of "Mercosur" a common market
established by customs agreements between Argentina, Brazil, Uruguay, and
Paraguay. The "Mercosur" market comprises a population of approximately 200
million with a total gross domestic product of $1.1 trillion.
FORWARD LOOKING STATEMENTS
Certain matters discussed in this report, excluding historical information,
include forward-looking statements. Although the company believes such
forward-looking statements are based on reasonable assumptions, no assurance
can be given that every objective will be reached. Such statements are made in
reliance on the safe harbor protections provided under the Private Securities
Litigation Reform Act of 1995.
As required by such Act, the Company hereby identifies the following important
factors that could cause actual results to differ materially from any results
projected, forecasted, estimated or budgeted by the Company in forward-looking
statements: risks and uncertainties impacting the Company as a whole relate to
changes in general economic conditions in Argentina; future unpredictability and
volatility of product prices, in particular oil prices, which can be affected by
political events in producer nations; the availability and cost of capital;
changes in laws and regulations to which the Company is subject, including tax,
environmental and employment laws and regulations; the cost and effects of legal
and administrative claims and proceedings against the Company or its
subsidiaries or which may be brought against the Company. It is possible that
certain aspects of the Company's businesses that are currently unregulated may
be subject to regulation in the future.
11
<PAGE> 12
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.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
At December 31, 1997, there were 1,309 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).
The Company currently pays its shareholders a quarterly dividend of 16.25 cents
per share. 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 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
Quarter of 1997
First $ 27 $ 19 3/4 $.16 1/4
Second 28 1/2 23 1/2 .16 1/4
Third 33 25 .16 1/4
Fourth 41 31 1/2 .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.
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ----------
(Dollars in thousands
except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $48,009 $46,765 $36,942 $33,267 $31,524
Net Income 13,023 12,661 8,268 8,168 9,305
Income per
Ordinary Share 1.77 1.72 1.12 1.11 1.26
Dividends Declared per
Ordinary Share .65 .65 .975 1.30 1.30
Total Assets at
December 31 64,990 55,684 46,498 44,342 46,378
Stockholders' Equity at
December 31 51,817 43,578 35,702 34,610 36,010
</TABLE>
14
<PAGE> 15
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 1997, the Company received
$11.2 million in distributions and dividends compared with $9.8 million and
$7.2 million in 1996 and 1995, respectively.
Receipt of future distributions and dividends 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
Throughout 1996 and most of 1997, the Company benefited from favorable world
oil prices. From $15 to $16 in 1994 and 1995, the Company's average per barrel
sales price increased to $20.87 and $19.52 during 1996 and 1997, respectively.
This favorable price environment was a major contributor to the record levels
of net income reported by the Company during this year and last.
As with any commodity, the price of oil is subject to economic cycles and
demand and supply imbalances. In recent years, strong economic growth
throughout the world, both in developed countries and in emerging markets, such
as Argentina, has fueled an increase in demand for oil which resulted in the
favorable prices enjoyed by the Company during the last two years. However, in
the last half of 1997, two developments occurred which have resulted in a
dramatic drop in world oil prices. The decision by the Organization of
Petroleum Exporting Countries ("OPEC") to increase oil production targets, and
the Asian economic crisis, which began in mid 1997, and continues today, have
acted to increase oil supplies at a time when growth in demand for oil has
slowed.
The result of the above is that Entre Lomas oil is currently selling for $15
per barrel. This will have a significant impact on net income and cash flow
during the first quarter of 1998, and for the remainder of the year, should oil
prices remain at current levels.
OIL PRODUCTION
As described on page 7, under "Entre Lomas Fields" and "Oil Reservoirs", four
wells drilled in the Entre Lomas oil field, during late 1996 and early 1997,
were significantly more productive in the early stages of their life cycle than
other wells in that field. Results of these four wells were largely
responsible for increasing daily oil production in the concession from
approximately 9,000 barrels in mid 1996 to more than 11,000 barrels in early
1997. As is characteristic of high volume wells, these wells have experienced
proportionately higher production declines during the first year. Daily oil
production in the Entre Lomas concession is currently 9,400 barrels.
15
<PAGE> 16
In the Canadon Ramirez concession, three of the four wells worked over and
stimulated as part of the Company's investment commitment had favorable short
term test results. The wells were recently equipped for production and long
term tests are currently underway.
CAPITAL SPENDING
The investment program approved by the Entre Lomas partners for 1998, including
major expense items such as well workovers, totaled $45 million, or $22 million
net to the Company. In addition to workovers, the major components of the
program include, development drilling, continued expansion of secondary
recovery in CB/PB, increases in lift capacity, implementation of secondary
recovery in the Entre Lomas oil field, a major 3D seismic program, and
continuation of the program to reinject produced water in CB/PB.
In light of the sudden price decline described above, the joint venturer's have
reviewed the approved investment budget and have agreed upon spending
priorities. Investments related to reinjection of produced water in CB/PB, and
3D seismic will be postponed if necessary.
ACAMBUCO
As described on page 10, under "Future Activity", the Acambuco joint venture,
which now includes the involvement of Amoco, is projecting capital spending in
the Acambuco concession in excess of $100 million during 1998 and 1999. The
Company's share of this program will approximate $2 million.
FOREIGN OPERATIONS
As described on page 11, the Company believes that its Argentine operations
present minimal currency risk. Argentina's inflation rate was less than 1
percent in 1997. The governments' convertibility law essentially guarantees an
exchange rate of one Argentine peso to one U.S. dollar.
RESULTS OF OPERATIONS
REFER TO CONSOLIDATED STATEMENT OF OPERATIONS ON PAGE 21.
1997 VS 1996
Operating revenues increased by $1.1 million compared with 1996 due to higher
oil sales volumes which resulted from drilling successes which occurred in the
Entre Lomas oil field in late 1996 and early 1997 described on the previous
page under "Oil Production". This effect was partially offset by lower average
oil sales prices resulting from the sharp decline in world oil prices which
occurred during the latter part of 1997, and lower gas sales volumes.
Depreciation, depletion, and amortization expense decreased by $815 thousand
due to completion, in mid 1997, of the amortization of the Company's $8.3
million share of settlement costs associated with obtaining the right,
commencing in 1994, to sell in the open market gas produced in the Entre Lomas
concession.
16
<PAGE> 17
Argentine taxes were higher by $473 thousand due to greater income taxes
associated with the greater Argentine taxable income generated during the year.
The variation in other expense of $1.5 million results from a combination of
two factors. The first is an increase in the general provision for contingent
liabilities of approximately $800 thousand, which is reflected on the Company's
Consolidated Balance Sheets by the increase in "Other liabilities". The second
is inventory fluctuation expense of $400 thousand associated with the
reduction, through sales during the year, of crude oil inventories in the Entre
Lomas concession.
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, 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 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.
YEAR 2000 COMPLIANCE
In the next two years, most companies will face a potentially serious
information systems problem because many software applications and the
operational programs written in the past may not properly recognize calendar
dates beginning in the year 2000. This problem could force computers to either
shut down or provide incorrect data or information. The Company has initiated
the process of identifying the changes required to its computer programs.
Software upgrades designed to correct the year 2000 problem are scheduled to be
implemented before mid 1999. The Company does not anticipate the cost of these
software and hardware changes to have a material adverse impact on its
business, financial condition, or results of operations.
17
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Report of Independent Public Accountants 19
Consolidated Balance Sheets
December 31, 1997 and 1996 20
Consolidated Statements of Operations
Three Years Ended December 31, 1997 21
Consolidated Statements of Stockholders' Equity
Three Years Ended December 31, 1997 22
Consolidated Statements of Cash Flows
Three Years Ended December 31, 1997 23
Notes to Consolidated Financial Statements 24
</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.
18
<PAGE> 19
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, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tulsa, Oklahoma
March 13, 1998
19
<PAGE> 20
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Amounts in Thousands) December 31,
---------------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents (Note 4) $ 21,183 $ 18,953
Accounts receivable 7,028 6,375
Inventory 2,477 4,098
Other current assets 327 364
--------- ---------
Total Current Assets 31,015 29,790
--------- ---------
Property and Equipment:
Cost 67,075 54,891
Accumulated depreciation (33,890) (29,129)
--------- ---------
33,185 25,762
Other Assets 790 132
--------- ---------
$ 64,990 $ 55,684
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 2,727 $ 2,835
Accrued liabilities 6,048 5,687
Dividends payable 1,196 1,196
--------- --------
Total Current Liabilities 9,971 9,718
--------- ---------
Other Liabilities 3,202 2,388
--------- ---------
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 42,417 34,178
------- --------
Total Stockholders' Equity 51,817 43,578
------- --------
$64,990 $55,684
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
20
<PAGE> 21
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Amounts in Thousands Except Per Share) For the Years Ended December 31,
---------------------------------------------
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
REVENUES:
Operating revenues $47,065 $45,954 $35,742
Other revenues 944 811 1,200
------- ------- --------
48,009 46,765 36,942
------- ------- --------
COST AND EXPENSES:
Operating expense 14,772 14,186 12,355
Provincial royalties 4,936 5,155 3,759
Selling and administrative 1,891 2,162 2,371
Depreciation, depletion and amortization 4,761 5,576 4,625
Exploration expense 313 684 1,457
Argentine taxes (Note 8) 7,035 6,562 4,046
Other (income) expense, net 1,278 (221) 61
------- ------- --------
34,986 34,104 28,674
------- ------- --------
NET INCOME $13,023 $12,661 $ 8,268
======= ======= ========
INCOME PER ORDINARY SHARE $ 1.77 $ 1.72 $ 1.12
======= ======= ========
AVERAGE ORDINARY SHARES
OUTSTANDING 7,360 7,360 7,360
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
21
<PAGE> 22
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Amounts in Thousands)
Ordinary Shares Additional
---------------------- Paid-in Retained
Shares Amount Capital Earnings
-------- ------- -------- --------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1995 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
($0.65 per share) - - - (4,785)
-------- ------- -------- --------
BALANCE, December 31, 1996 7,360 74 9,326 34,178
Net income - - - 13,023
Dividends declared
($ 0.65 per share) - - - (4,784)
-------- ------- -------- --------
BALANCE, December 31, 1997 7,360 $ 74 $ 9,326 $ 42,417
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
22
<PAGE> 23
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------
1997 1996 1995
-------- --------- -------
(Amounts in Thousands)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 13,023 $ 12,661 $ 8,268
-------- --------- -------
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 4,761 5,576 4,625
Abandonment of well drilled in prior year - 496 502
Reclassification of plugging and abandonment
provision from other liabilities to accumulated depreciation - - 626
Changes in accounts receivable (653) (676) 340
Changes in inventory 1,621 (1,618) (135)
Changes in other current assets 37 (147) 39
Changes in accounts payable (108) (1,087) 1,944
Changes in accrued liabilities 361 2,381 788
Other, including changes in non-current
assets and liabilities 156 (63) (488)
-------- --------- -------
Net cash provided by operating activities 19,198 17,523 16,509
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (12,184) (11,029) (10,062)
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid (4,784) (4,785) (8,372)
-------- --------- -------
NET CHANGES IN CASH AND
CASH EQUIVALENTS 2,230 1,709 (1,925)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 18,953 17,244 19,169
-------- --------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $21,183 $18,953 $17,244
======== ========= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for income taxes $ 7,451 $ 4,043 $ 2,785
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
23
<PAGE> 24
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 68.96 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, in previous years, was required to deal with threats
from inflation, devaluation and currency controls (see Note 9).
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.
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.
24
<PAGE> 25
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
P.I.C.S.R.L. ("Bridas") a wholly owned subsidiary of Pan American
Energy Investments Ltd., is the operator of the joint venture.
As part of a 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. Pursuant to the
terms of the third amendment to the loan agreement and the
associated Williams loan guarantee, payments on the loan began
May 15, 1992. To date all principal and interest payments have
been made on schedule and the current loan balance is $1.0
million.
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.
(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,
25
<PAGE> 26
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
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
operations, 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.
(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>
Principal
---------------------------
1997 1996
------- -------
<S> <C> <C>
Short-term investments:
Eurodollar term deposits with interest
ranging from 5.305 - 5.4375 % in 1997
and 4.9375 - 5.25 % in 1996, maturing
in January 1998 and January 1997,
respectively. $13,456 $13,640
Argentine time deposits 7,727 5,313
------- -------
$21,183 $18,953
======= =======
</TABLE>
The carrying amount reported in the balance sheet for short-term
investments is equivalent to fair value.
26
<PAGE> 27
(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,
----------------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
San Lorenzo S.A. 54.3% 62.1% 35.4%
EG3 S.A. * * 26.2%
Litoral S.A. 10.9% 13.1% 16.7%
Shell C.A.P.S.A. 16.0% * *
</TABLE>
* Less than 10 percent
(6) RELATED PARTY TRANSACTIONS
The Company paid approximately $166,000, $182,000, and $206,000
in 1997, 1996 and 1995, 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, 1997 and
December 31, 1996, of approximately $24,000 and $58,000, were
paid in 1998 and 1997 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.
27
<PAGE> 28
(8) ARGENTINE TAXES
The Company recorded Argentine taxes as presented in the
following table. Amounts are stated in thousands of dollars.
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Income taxes $6,208 $5,830 $3,460
Other taxes 827 732 586
------ ------ ------
$7,035 $6,562 $4,046
====== ====== ======
</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 opinion of the joint venture and its legal and tax
counsels 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.
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, amounted
to $9.2 million. An appeal was filed by Petrolera in Argentine
Federal Tax Court. In April 1997, the court ruled in favor of
the DGI. Petrolera appealed the ruling before Federal Appeals
Court. Although the DGI can require that the amount in question
be deposited, it has not done so pending the appellate court's
ruling. In the opinion of Petrolera's management and its legal
and tax counsel, the possibility that this claim will result in
an unfavorable outcome for the joint venture 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 February 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 Petrolera and the Company.
28
<PAGE> 29
(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.
In April of 1991, the convertibility law was implemented
establishing an exchange rate of one Argentine peso to one U.S.
dollar. The convertibility law 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, 1997 as the rate of exchange has remained 1 to
1.
(10) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
(Amounts in Thousands Except
Per Share Amounts)
<S> <C> <C> <C> <C>
1997
Revenues $12,978 $10,823 $12,294 $11,914
Costs and expenses 9,211 7,994 8,411 9,370
Net income 3,767 2,829 3,883 2,544
Net income per ordinary share .51 .39 .52 .35
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
</TABLE>
29
<PAGE> 30
SUPPLEMENTAL OIL AND GAS INFORMATION
OIL AND GAS RESERVES (UNAUDITED)
The following tables summarize, for each of the years presented, changes in
quantities, and balances of net proved oil and gas reserves for all the
Company's interests.
<TABLE>
<CAPTION>
Proved Oil, Condensate and (Millions of Barrels)
Plant Products --------------------------------------
1997 1996 1995
------ -------- --------
<S> <C> <C> <C>
Beginning of year 34.7 37.4 39.5
Revisions of previous estimates 0.1 (1.7) (0.7)
Additions 0.2 0.8 0.4
Production (1.8) (1.8) (1.8)
----- ----- -----
End of Year 33.2 34.7 37.4
===== ===== =====
Developed oil reserves 23.7 24.2 25.1
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Natural Gas
(Billions of cubic feet)
-------------------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Beginning of year 46.8 53.5 33.8
Revisions of previous estimates (8.6) 1.7 (1.6)
Additions 6.1 - 27.1
Production (7.7) (8.4) (5.8)
----- ----- -----
End of Year 36.6 46.8 53.5
===== ===== =====
Developed gas reserves 35.8 44.3 47.8
===== ===== =====
</TABLE>
There were no estimates of total proved net oil or gas reserves filed with any
other United States Federal authority or agency during 1997.
30
<PAGE> 31
SUPPLEMENTAL OIL AND GAS INFORMATION - CONT.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (UNAUDITED)
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 from all of the concessions
in which the Company holds interests.
<TABLE>
<CAPTION>
(Millions of U.S. Dollars)
-----------------------------------
1997 1996 1995
------ ----- ------
<S> <C> <C> <C>
Future revenues (1 and 2) $ 619 $ 911 $ 732
Future expenditures (3) 378 409 401
------ ----- ------
241 502 331
Argentine taxes (4) 67 155 90
------ ----- ------
Future net cash flows 174 347 241
------ ----- ------
Effect of discounting 10% 90 182 127
------ ----- ------
Discounted future net cash flows $ 84 $ 165 $ 114
====== ===== ======
</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 year end average per barrel
oil price for 1997 was $17.20, as compared with $24.52 and $17.58 for
1996 and 1995 respectively. Gas prices for all years are based on gas
sales contracts in effect during the respective years.
(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.
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.
31
<PAGE> 32
SUPPLEMENTAL OIL AND GAS INFORMATION - CONT.
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM PROVED
OIL AND GAS RESERVES (UNAUDITED)
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.
<TABLE>
<CAPTION>
(Millions of U.S. Dollars)
----------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Prices and costs:
Net changes in prices and
production costs $ (129) $ 118 $ 12
Quantities:
Revenues, net of
production costs (15) (15) (11)
Additions and revisions
of previous estimates - net 1 (8) 14
Other:
Changes in estimated
future development costs 6 (10) (2)
Accretion of discount 24 16 13
Net changes in Argentine
taxes 40 (35) (8)
Timing of future
production and other (8) (15) 1
------ ----- ----
Net increase (decrease) in
discounted future net
cash flows $ (81) $ 51 $19
====== ==== ===
</TABLE>
32
<PAGE> 33
SUPPLEMENTAL OIL AND GAS INFORMATION - CONT.
SALES AND PRICE STATISTICS (UNAUDITED)
The following table shows total sales of crude oil and condensate and natural
gas and average sales prices and production costs for the last three years.
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
Total Sales-Net to Company
- --------------------------
<S> <C> <C> <C>
Crude Oil and Condensate (bbls) 1,811,956 1,584,291 1,638,379
Gas (mcf) 7,733,392 8,433,543 5,827,375
LPG (tons) 6,607 6,829 7,504
Average Sales Prices (in U.S. Dollars)
- --------------------------------------
Oil (per bbl) $ 19.52 $ 20.87 $ 16.67
Gas (per mcf) 1.34 1.33 1.23
LPG (per ton) 198.72 182.60 166.33
Average Production Costs (in U.S. Dollars)
- ------------------------------------------
Oil (per bbl) $ 8.27 $ 8.15 $ 7.13
Gas (per mcf) .21 .22 .19
LPG (per ton) 89.70 82.59 65.47
</TABLE>
Volumes presented in the above table represent those sold to 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 Company. In calculating royalty
payments, the Argentine producers are entitled to deduct gathering, storage,
treating and compression costs.
Average production cost is calculated by taking into consideration all costs of
operation, including the costs of remedial well workovers and depreciation of
property and equipment.
33
<PAGE> 34
SUPPLEMENTAL OIL AND GAS INFORMATION - CONT.
COSTS INCURRED IN ACQUISITIONS, EXPLORATION, AND DEVELOPMENT
The following table details total investments for acquisitions, exploration,
and development made by the Company during the current and two previous years.
<TABLE>
<CAPTION>
(Millions of U.S. Dollars)
---------------------------------------
1997 1996 1995
----- ----- -----
Net Net Net
----- ----- -----
<S> <C> <C> <C>
Property Acquisitions $ 1 $ - $ -
Exploration - 1 1
Development 11 10 10
Workovers 3 3 2
----- ----- -----
Total $ 15 $ 14 $ 13
===== ===== =====
</TABLE>
WELL COUNT AND ACREAGE (UNAUDITED)
The total net well count from all acreage in which the Company has an interest
for the years ended December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Oil 135 132
Gas 9 10
Abandoned and Inactive 11 10
Injection 45 41
----- -----
Total 200 193
----- -----
</TABLE>
The Company currently holds interest in three concessions with a total surface
area of 542,000 acres, 132,600 net to the Company. Of this net surface area,
16,741 net acres represent productive acreage.
CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
(Thousands of U.S. Dollars)
---------------------------
1997 1996
--------- ---------
<S> <C> <C>
Unproved $ 875 $ -
Proved oil and gas properties 65,766 54,530
Accumulated depreciation,
depletion and amortization (27,961) (22,763)
--------- -----------
Net capitalized costs $ 38,680 $ 31,767
========= ===========
</TABLE>
34
<PAGE> 35
SUPPLEMENTAL OIL AND GAS INFORMATION - CONT.
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> <C>
J. C. Bumgarner 55 Chairman of the Board and 1994 2000
Chief Executive Officer
J. H. Williams 79 Director 1992 1999
K. E. Bailey 55 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>
Officer
Name Age Position Since
------------------ --- ----------------------------------- --------
<S> <C> <C> <C>
John C. Bumgarner 55 Chairman of the Board and 1996
Chief Executive Officer
J. D. McCarthy 55 Vice President and 1991
Chief Financial Officer
Thomas Bueno 46 Controller and Chief 1991
Accounting Officer
</TABLE>
Mr. Bueno also serves as Managing Director over the
Company's operations in Argentina
(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 Officer 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 has been employed by Williams since 1984, and
previously served as 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
36
<PAGE> 37
receive an annual retainer of $8,000 and an additional fee for
attending Board meetings of $500 per meeting.
(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,
1997
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name and Address of Beneficial of
Title of Class Beneficial Owner Ownership Class
------------------ ---------------------------------- --------- ---------
<S> <C> <C> <C>
Ordinary Shares The Williams Companies, Inc. 5,075,398 68.96
$.01 Par Value One Williams Center
Tulsa, Oklahoma 74172
Ordinary Shares Lehman Brothers Holdings Inc. 390,311 5.3
$.01 Par Value 3 World Financial Center, 24th Floor
New York, NY 10285
Ordinary Shares I. Wistar Morris, III 374,069 5.08
$.01 Par Value 200 Four Falls Corporate Center
Suite 208
West Conshohocken, PA 19428
</TABLE>
(b) SECURITY OWNERSHIP OF MANAGEMENT AT DECEMBER 31, 1997
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
PART 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) - 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.
*(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. 0-8933, 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.
</TABLE>
38
<PAGE> 39
<TABLE>
<S> <C>
*(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) - 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) - 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.
*(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.
</TABLE>
* 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.
39
<PAGE> 40
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, 1998 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.
<TABLE>
<S> <C>
/s/ *John C. Bumgarner March 27, 1998
- ---------------------------------------------------
John C. Bumgarner, Chairman of the Board
and Chief Executive Officer
/s/ *Jack D. McCarthy March 27, 1998
- ---------------------------------------------------
Jack D. McCarthy, Vice President and
Chief Financial Officer
/s/ *Thomas Bueno March 27, 1998
- ---------------------------------------------------
Thomas Bueno, Controller and Chief
Accounting Officer
/s/ *John H. Williams March 27, 1998
- -----------------------------------------------------
John H. Williams, Director
/s/ *Keith E. Bailey March 27, 1998
- -------------------------------------------------------
Keith E. Bailey, Director
*By: /s/ Thomas Bueno March 27, 1998
---------------------------------------------
Thomas Bueno, Attorney-in-Fact
</TABLE>
40
<PAGE> 41
EXHIBIT INDEX
<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, 1997, 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 18th day of March, 1998.
/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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 21,183
<SECURITIES> 0
<RECEIVABLES> 7,028
<ALLOWANCES> 0
<INVENTORY> 2,477
<CURRENT-ASSETS> 31,015
<PP&E> 67,075
<DEPRECIATION> 33,890
<TOTAL-ASSETS> 64,990
<CURRENT-LIABILITIES> 9,971
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 51,743
<TOTAL-LIABILITY-AND-EQUITY> 64,990
<SALES> 47,065
<TOTAL-REVENUES> 48,009
<CGS> 0
<TOTAL-COSTS> 26,360
<OTHER-EXPENSES> 2,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,231
<INCOME-TAX> 6,208
<INCOME-CONTINUING> 13,023
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,023
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
</TABLE>
