<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
- ---
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
- ---
FOR THE TRANSITION PERIOD FROM TO
------ ------
COMMISSION FILE NUMBER 0-8933
APCO ARGENTINA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CAYMAN ISLANDS
(STATE OR OTHER JURISDICTION OF EIN 98-0199453
INCORPORATION OR ORGANIZATION)
POST OFFICE BOX 2400
TULSA, OKLAHOMA 74102
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (918) 573-2164
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT OCTOBER 31, 1999
ORDINARY SHARES, $.01 PAR VALUE 7,360,311 SHARES
<PAGE> 2
APCO ARGENTINA INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - September 30, 1999 and
December 31, 1998 3
Consolidated Statements of Operations - Three and
Nine Months Ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION 15
</TABLE>
Portions of this document may constitute forward-looking statements as defined
by federal law. Although Apco Argentina Inc. believes any such statements are
based on reasonable assumptions, there is no assurance that actual outcomes will
not be materially different. Additional information about issues that could lead
to material changes in performance is contained in Apco Argentina Inc.'s annual
report on Form 10-K
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Amounts in Thousands) September 30, December 31,
1999 1998
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 13,444 $ 13,596
Accounts receivable 7,487 5,653
Inventory 627 865
Other current assets 566 472
-------- --------
Total Current Assets 22,124 20,586
-------- --------
Property and Equipment:
Cost 84,801 79,596
Accumulated depreciation (41,950) (38,458)
-------- --------
42,851 41,138
Other assets 1,510 550
-------- --------
$ 66,485 $ 62,274
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,915 $ 5,415
Accrued liabilities 5,404 2,092
Dividends payable 1,196 1,196
-------- --------
Total Current Liabilities 9,515 8,703
-------- --------
Other Liabilities 3,207 3,170
Deferred Tax Liability 100 --
Stockholders' Equity, per accompanying statements:
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 44,263 41,001
-------- --------
Total Stockholders' Equity 53,663 50,401
-------- --------
$ 66,485 $ 62,274
======== ========
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
3
<PAGE> 4
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in Thousands Except Per Share) Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
REVENUES:
Operating revenue $11,934 $ 9,641 $29,038 $26,026
Other revenues 116 183 320 629
------- ------- ------- -------
12,050 9,824 29,358 26,655
------- ------- ------- -------
COSTS AND EXPENSES:
Operating expense 2,933 3,796 8,299 10,007
Provincial royalties 1,313 916 3,122 2,766
Transportation & storage 445 551 1,351 1,455
Selling and administrative 409 444 1,479 1,577
Depreciation, depletion and amortization 1,212 1,139 3,630 3,079
Exploration expense 196 24 198 164
Argentine taxes 2,073 1,146 4,194 2,632
Other expense, net 319 296 235 342
------- ------- ------- -------
8,900 8,312 22,508 22,092
------- ------- ------- -------
NET INCOME $ 3,150 $ 1,512 $ 6,850 $ 4,563
======= ======= ======= =======
INCOME PER ORDINARY SHARE, Basic and Diluted $ .43 $ .21 $ .93 $ .62
======= ======= ======= =======
AVERAGE ORDINARY SHARES
OUTSTANDING, Basic and Diluted 7,360 7,360 7,360 7,360
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 5
APCO ARGENTINA INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in Thousands Except Per Share) Three Months Ended
September 30,
-------------------------
1999 1998
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 6,850 $ 4,563
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion and amortization 3,630 3,079
Retirement of property 20 --
Changes in accounts receivable (1,834) (795)
Changes in inventory 238 1,471
Changes in other current assets (94) (88)
Changes in accounts payable (2,500) 526
Changes in accrued liabilities 3,312 (2,678)
Changes in other assets and liabilities
including Acambuco investments (823) 562
-------- --------
Net cash provided by operating activities 8,799 6,640
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (5,363) (9,615)
CASH FLOW FROM FINANCING ACTIVITIES:
Dividends paid (3,588) (3,588)
-------- --------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (152) (6,563)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE PERIOD 13,596 21,183
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 13,444 $ 14,620
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for Argentine income taxes $ 1,167 $ 3,516
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 6
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
The unaudited, consolidated financial statements of Apco Argentina Inc.
and subsidiary (the "Company"), included herein, do not include all
footnote disclosures normally included in annual financial statements
and, therefore, should be read in conjunction with the financial
statements and notes thereto included in the Company's 1998 Form 10-K.
In the opinion of the Company, all adjustments have been made to
present fairly the results of the three and nine months ended September
30, 1999 and 1998. The results for the periods presented are not
necessarily indicative of the results for the respective complete
years.
(2) INCOME TAXES
As described in Note 6 of Notes to Consolidated Financial Statements
included in the Company's 1998 Form 10-K, the Company believes its
earnings are not subject to U.S. income taxes, nor Cayman Islands
income or corporation taxes.
Income derived by the Company from its Argentine operations is subject
to Argentine income tax at a rate of thirty five percent (thirty three
percent for 1998) and is included in the Consolidated Statements of
Operations as Argentine taxes. The rate was increased to thirty-five
percent as of December 31, 1998 and was effective for all of 1998.
(3) OBLIGATORY SAVINGS
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.
It was the opinion of the Entre Lomas 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 which
ruled in favor of the DGI in April 1997. Petrolera appealed the ruling
before Federal Appeals Court which in November 1998, ruled in favor of
Petrolera. The DGI has now filed an appeal before the Supreme Court.
Although the DGI can require that the amount in question be deposited,
it has not done so pending the courts final ruling.
6
<PAGE> 7
APCO ARGENTINA INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of the date of these Consolidated Financial Statements, the Supreme
Court has not yet rendered its decision. Although there exists an
unfavorable ruling in the court in a prior case regarding Obligatory
Savings, our case is different and there are arguments that support the
Appellate Court's decision in favor of Petrolera and the joint venture.
In the opinion of legal and tax counsel, the possibility that this
claim will result in an unfavorable outcome for the joint venture is
only reasonably possible. The Company has no reason to believe
otherwise. Nevertheless, management does not believe the Company will
incur a significant negative affect on its financial condition or
results of operation in the event of an unfavorable ruling in excess of
reserves previously provided by the joint venture and the Company.
(4) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133"). SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts)
be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset
related results on the hedged item in the income statement. Companies
must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, which amended SFAS No. 133 to extend the effective
date of adoption for fiscal periods after June 15, 2000. Further, SFAS
137 requires companies to either (a) recognize as an asset or liability
in the balance sheet all embedded derivative instruments at the date of
initial application or (b) select either January 1, 1998 or January 1,
1999 as a application date, and only those derivatives issued,
acquired, or substantively altered on or after that date shall be
recognized in the balance sheet. SFAS Nos. 133 and 137 have no impact
on the Company's financial statements as it currently is not using
derivative instruments.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion explains the significant factors which have affected
the Company's financial condition and results of operations during the periods
covered by this report.
FINANCIAL CONDITION
OIL PRICES
This year's March OPEC meeting resulted in a decision by member nations to
implement important reductions in oil production quotas. Commodities markets
reacted favorably to the decision and oil prices began to rise. Furthermore,
since the second quarter of the year, there are indications of renewed growth in
the economies of far-east Asian countries that had been in recession since
mid-1997. This combination of events helped trigger an increase in oil prices
that by the end of June reached $18 per barrel, as measured by West Texas
Intermediate, the benchmark crude used to determine oil prices in Argentina. The
price of oil continued to increase sharply during the third quarter such that,
after adjusting for the local discount from WTI, the Company's per barrel sales
price in September averaged $22.94.
As reflected in the statistical table on page 11, the year to date nine-month
per barrel oil price averaged $16.08. This improvement in oil prices has had a
significant positive impact on the Company's year to date net income as
reflected by the upward trend in the Company's quarterly net income during the
year.
<TABLE>
<CAPTION>
--------------------------------------------------------
1999 NET INCOME IN MILLIONS
--------------------------------------------------------
<S> <C>
1st quarter $ 1.4
--------------------------------------------------------
2nd quarter $ 2.3
--------------------------------------------------------
3rd quarter $ 3.2
--------------------------------------------------------
Year to date $ 6.9
--------------------------------------------------------
</TABLE>
There is no way to predict whether this recent sharp increase in crude oil
prices can be sustained. Many factors affect this market, including, among
others, exploration discoveries, fluctuations in market demand, and adherence by
OPEC member nations to the production quotas.
CAPITAL SPENDING
As described in the first quarter 10-Q, due to the depressed state of oil prices
in 1998 and the first quarter of 1999, the Entre Lomas partners reduced the 1999
capital budget by fifty percent from the originally proposed $26 million, or
$12.5 million net to the Company. However, since April, the joint venture has
twice modified the investment program, restoring many items in the original
program including development drilling, and supplementing the budget for the
conversion of all remaining gas lift wells in the Charco Bayo/Piedras Blancas
field to rod pumps. This requires an additional investment of $10 million, or
$4.7 million net to the Company. The conversion program commenced in
8
<PAGE> 9
August and should be completed by the end of the year 2000. Its effect should be
modest increases in oil production resulting from more efficient production from
the converted wells, and availability for sale of associated gas currently being
consumed by the gas lift system.
By mid October, all development drilling provided for in the restored program
had been completed. Eleven wells have been drilled, completed, and placed on
production.
Secondary recovery operations commenced in the Entre Lomas oil field in 1998.
Over the next two years, waterflooding will be expanded gradually throughout
this entire field which to date contains 48 wells. Several of the development
wells drilled in this field during 1998 and 1999 will eventually be converted to
injection. The length of time they remain on production will depend on their
future performance. The El Caracol waterflood, the oil field in the northwest
corner of the concession, produces from the same formation as the Entre Lomas
oil field. It has proven to be a successful waterflood. The joint venture
partners expect similar results in this field.
PRODUCTION
Over the first nine months of the year, daily oil production in the Entre Lomas
concession averaged 9,943 barrels, or 4,737 barrels net to the Company. Over the
same period, daily natural gas production averaged 42.3 million cubic feet, or
20.1 million cubic feet net to the Company.
ENTRE LOMAS EXPLORATION
In March 1999, the joint venture partners began their interpretation of the 370
square kilometers of 3D seismic shot over the Entre Lomas concession during the
latter part of 1998. It is expected that the interpretation will be completed by
the end of the year. This just acquired seismic enables the partners to
integrate it and the previous 1995 3D seismic program into one continuous block
over the entire length of the concession. It is the intention of the partners to
identify the most attractive exploration prospects, and thereafter, if oil
prices cooperate, undertake exploration drilling in the concession.
To date several interesting prospects have been defined targeting both the
existing producing formations and as yet unexplored deeper horizons. Additional
work is required to refine and map the areas of interest. This seismic has
helped to establish that the area of possible development around the Borde Mocho
#1 discovery well, drilled in 1995, may be bigger than originally mapped from 2D
seismic. The partners are currently drilling the Borde Mocho # 2 to confirm
whether this structure merits additional development.
9
<PAGE> 10
ACAMBUCO
Two wells are currently drilling in this concession. The first well, the San
Pedrito x-2 commenced drilling in September 1998. The intended objective is to
confirm the 1996 Huamampampa discovery made by the San Pedrito x-1 well. During
the course of drilling, this well has experienced various problems. Cumulative
costs of this well to date total more than $40 million, or more than $600
thousand net to the Company's interest. Today the well is drilling through the
Huamampampa. Although there are as yet no test results, the well appears to
contain gas. After evaluating Huamampampa, the partners will proceed to the
second target, the Santa Rosa formation. Total depth of 18,150 feet should be
reached sometime in December.
The second well, the Cerro Tuyunti x-1, commenced drilling in January of this
year. It will explore what is believed to be the largest of the four principal
structures currently identified in the concession. This well is currently
drilling below 18,000 feet and has been relatively problem free. However, repeat
sections of a shallower formation were encountered resulting in the Huamampampa
formation being considerably deeper than originally believed. The joint venture
expects to reach the target below 19,000 feet, which places the top of the
formation below the original projected total depth of the well.
The subsurface environment in Acambuco is very faulted and folded. Combine this
aspect with the depth of the target formations and the result is complex and
difficult drilling. To date, of all deep wells drilled in Acambuco dating back
to the early 1980's, all have experienced mechanical problems and encountered
unexpected subsurface conditions.
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1999, the Company generated
net income of $3.2 million and $6.9 million, respectively. This compares with
$1.5 million and $4.6 million for the same periods in 1998.
The improvement in net income for the three month periods is due to increased
oil sales revenue caused by the sharp rise in the Company's average oil sales
price that has occurred since April. The factors that have given rise to this
price increase are explained previously under "Financial Condition". In
addition, operating expense during the period decreased due to the reduced
volume of workovers performed in the Entre Lomas concession, personnel
reductions implemented in Entre Lomas, and the cessation of operations in the
on. In 1998, the Company was incurring expenses related to its Canadon Ramirez
work commitment. The positive effects of increased sales and reduced operating
expense were partially offset by higher provincial royalties and Argentine
production and income taxes.
The improvement in net income for the nine-month periods is also principally due
to increased oil sales revenue caused by the aforementioned sharp increase in
the Company's average oil sales price. Furthermore, at this time last year, oil
prices were declining, a trend that continued into early 1999. The other factors
that contributed to the increase in net income for the nine-month periods, with
the exception of increased depreciation related to the Canadon Ramirez
concession, are the same as those described previously for
10
<PAGE> 11
the three-month periods. More specifically, they are lower operating expense in
both Entre Lomas and Canadon Ramirez, offset by higher provincial royalties and
Argentine production and income taxes.
The following table shows sales of crude oil, condensate, natural gas and gas
liquids, net to the Company's interest, and average sales prices, and production
costs for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------------
September 30, September 30
1999 1998
---------------- ----------------
<S> <C> <C>
Total Sales Volumes-Net to Company
- ----------------------------------
Crude Oil and Condensate (bbls) 1,289,597 1,273,702
Gas (mcf) 5,496,218 6,138,920
LPG (tons) 4,973 4,625
Average Sales Prices (in U.S. Dollars)
- --------------------------------------
Oil (per bbl) $ 16.08 $ 13.34
Gas (per mcf) $ 1.36 $ 1.37
LPG (per ton) $ 162.66 $ 170.65
Average Production Costs (in U.S. Dollars)
- ------------------------------------------
Oil (per bbl) $ 8.25 $ 8.86
Gas (per mcf) $ .18 $ .25
LPG (per ton) $ 66.77 $ 84.96
</TABLE>
Volumes presented in the above table represent those sold to customers and do
not consider provincial royalties, which are paid separately and are accounted
for as an expense by the Company. In calculating provincial royalties to be
paid, 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 costs of remedial workovers and depreciation of property
and equipment.
11
<PAGE> 12
YEAR 2000 COMPLIANCE
During 1999, 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 shut down or provide incorrect data
or information. Petrolera, the operator of the Entre Lomas concession, from
which the Company derives one-hundred percent of its operating revenue, has
completed the process of identifying changes required to computer programs that
impact the critical aspects of the joint venture's business and guarantee
continuation of its production and sales operations, including major interfaces
with customers and suppliers such as pipelines that carry products to market and
companies that provide power to the concession.
Petrolera has also completed an inventory of all equipment and software that may
be affected by the change of the century, and is implementing modifications
required to become Year 2000 compatible. New financial, accounting and
administrative systems have been implemented that are fully compatible.
Petrolera, and the Company, believe that all systems over which they have direct
control will have achieved the fundamental objective of full Year 2000
compliance at a cost which is not material to the joint venture's business,
financial condition, or results of operation.
Although Petrolera is monitoring compliance efforts by major third party
companies upon which the Entre Lomas concession depends, there does exist the
possibility of operation disruptions in the event of non-compliance by third
parties. Sales disruption would be the worst case manifestation of this
possibility exposing the Company to a loss of sales revenue of approximately
$120 thousand per day. Based on Petrolera's discussions with third parties, the
Company expects them to also be fully compliant by the end of the year thereby
minimizing the chance of a disruption of operations.
Petrolera is in the process of developing contingency plans in the event that
disruptions occur as a result of third party non-compliance or any failure of
its systems.
12
<PAGE> 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company's operations are exposed to market risks as a result of changes in
Commodity prices and foreign currency exchange rates.
COMMODITY PRICE RISK
The Company produces and sells crude oil and natural gas. As a result, the
Company's financial results can be significantly impacted by fluctuations in
commodity prices due to changing market forces.
FOREIGN CURRENCY AND OPERATIONS RISK
The Company's operations are located in Argentina. Therefore, the Company's
financial results may be affected by factors such as changes in foreign currency
exchange risks, weak economic conditions, or changes in Argentina's political
climate.
ARGENTINE 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 one percent in
1998 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 Far East Asian and Russian financial crises of 1997 and 1998 impacted the
economies of many emerging market countries. Argentina was not affected
significantly but did experience a slow down in economic growth. In 1998, the
country's Gross Domestic Product grew at a rate of 4 percent compared with 8.6
percent in 1997. Economic activity in Argentina has been impacted negatively by
this year's currency devaluation in Brazil which is Argentina's single largest
trading partner. As a result, Argentina's economy has contracted during 1999.
13
<PAGE> 14
Argentina is 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. The devaluation of Brazil's currency in early
1999 is having an adverse impact on Argentine economic growth. Brazil is
Argentina's largest trading partner.
Presidential elections have just taken place. President Menem has completed his
second and final term. The new president elect is Fernando De la Rua of the
Alianza party. He will assume office on December 10 and has stated he intends to
preserve the convertibility law, the current monetary regime that has worked so
well since 1991. Mr. De la Rua will be forced to deal with the country's growing
fiscal deficit that if not brought under control will put increasing strain on
monetary policy.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual General Meeting of shareholders of the Company was held on
September 24, 1999. At the Annual General Meeting, two individuals were
elected as directors of the Company. One individual continued to serve
as director pursuant to his prior election. In addition, the appointment
of Arthur Andersen LLP as the independent auditor of the Company for
1999 was ratified.
A tabulation of the voting at the Annual Meeting with respect to the
matters indicated is as follows:
Election of Directors:
Name For Against Withheld
Thomas Bueno 6,965,220 1 5,093
Robert J. LaFortune 6,963,621 1,600 5,093
Ratification of Appointment of Independent Auditor:
Name For Against Withheld
Arthur Andersen LLP 6,965,676 3,829 809
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
15
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APCO ARGENTINA INC.
(Registrant)
By: /s/ Thomas Bueno
------------------------------------
Controller, (Duly Authorized Officer
of the Registrant) and
Chief Accounting Officer
November 11, 1999
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,444
<SECURITIES> 0
<RECEIVABLES> 7,487
<ALLOWANCES> 0
<INVENTORY> 627
<CURRENT-ASSETS> 22,124
<PP&E> 84,801
<DEPRECIATION> 41,950
<TOTAL-ASSETS> 66,485
<CURRENT-LIABILITIES> 9,515
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 66,411
<TOTAL-LIABILITY-AND-EQUITY> 66,485
<SALES> 29,038
<TOTAL-REVENUES> 29,358
<CGS> 0
<TOTAL-COSTS> 17,881
<OTHER-EXPENSES> 881
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,596
<INCOME-TAX> 3,746
<INCOME-CONTINUING> 6,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,850
<EPS-BASIC> .93
<EPS-DILUTED> .93
</TABLE>
