Apco Oil and Gas International Inc. (NASDAQ:APAGF) today
announced that for the three-month period ended March 31, 2012, it
generated unaudited net income attributable to Apco of $10.1
million, or $0.34 per share, compared with net income of $8.2
million, or $0.28 cents per share, for the same period in 2011.
Net income improved quarter-to-quarter primarily due to higher
average oil sales prices and greater equity income from Argentine
investment. These favorable variances were partially offset by
higher costs and operating expenses, including significantly higher
exploration expense.
Total operating revenues increased by $7 million compared with
first-quarter 2011. Higher average oil sales prices accounted for
$5.6 million of the increase for the quarter. A 5 percent increase
in oil sales volumes resulted in a $1.2 million favorable impact on
revenues.
Total costs and operating expenses for the quarter increased by
$7.8 million, primarily from higher exploration expense and
production costs including depreciation, depletion and amortization
expense.
Compared with first-quarter 2011, Apco incurred $4.6 million
more exploration expense due to increased exploration activity
which substantially offset the benefits of higher sales prices.
In first-quarter 2012, significant 3D seismic acquisition
investments were made in Apco’s properties in the San Jorge basin
of Argentina and in the Llanos basin of Colombia.
Apco also experienced higher equity income from its 40.72
percent interest in Petrolera Entre Lomas S.A. (Petrolera). During
first-quarter 2012, the benefits of higher average sales prices and
greater sales volumes contributed to an increase of $3.5 million in
equity income from Argentine investment compared with the same
period of 2011.
In recent months, the Argentine government asserted that
exploration and production companies operating in Argentina had not
invested sufficiently to overcome domestic production declines,
resulting in reduced levels of oil and natural gas production as
well as reductions in oil and natural gas proved reserves.
On that basis, various provinces rescinded several of YPF’s
concessions and two non-producing concessions from two other oil
and gas companies. On April 16, 2012, the federal government took
actions to expropriate from Repsol a majority interest in YPF, the
largest hydrocarbon-producing company in Argentina.
“We feel that because of YPF’s sheer size within Argentina’s
hydrocarbon sector, the government was primarily focused on YPF as
the main contributor to the cost of its energy subsidies. Apco
remains fully committed to Argentina where we have been investing
for more than 40 years,” said Ralph Hill, Apco’s chief executive
officer.
“Our track record of prudent development and exploration
investments has resulted in increased production and reserves
growth for many years,” Hill added.
2012 Capital Program, Operational Update and Colombia
Discovery
During first-quarter 2012, capital expenditures of $9.4 million
were invested primarily in development drilling in Neuquén basin
properties and exploration drilling in Coirón Amargo.
Development drilling in Apco’s core Neuquén basin properties is
on schedule, with results in line with expectations. The testing of
the CAS x-1 well was also completed after a multi-stage fracture of
the Vaca Muerta formation. The well was tested for a period of 48
days and produced intermittently for the equivalent 20 days with an
average flowing oil rate of 173 barrels per day. The well is now on
production.
During the balance of the year, multi-stage fractures of the
Vaca Muerta are expected to take place both in the Coirón Amargo
and Bajada del Palo concessions. Although results of this well test
are encouraging, exploration of the Vaca Muerta in the Neuquén
basin is in the very early stages. At this point, the productive
behavior of the formation is not well understood.
In March, Apco commenced drilling the first exploration well in
Colombia’s Llanos 32 block where the company has a 20 percent
working interest. The Maniceño-1 well reached a measured depth of
11,027 feet on April 18, 2012. The well encountered approximately
50 feet of oil column at the top of the Mirador formation. It was
then perforated across a 14-foot section, and over a period of four
hours the well flowed oil, on jet pump, at a rate of 7,558 barrels
of oil per day. In addition, the well flowed naturally at a rate of
3,036 barrels of oil per day over a subsequent six-hour period.
Results of the production testing are being evaluated to
determine the optimal rate at which the Maniceño-1 well should be
produced in order to maximize the ultimate volume of oil to be
recovered from this reservoir.
After installing a high-volume electric submersible pump in the
Maniceño-1 well, the drilling rig will move to a second Llanos 32
exploration drilling location, the Samaria Norte-1 prospect. It is
expected to spud before the end of May 2012.
Apco does not expect production to commence from the Maniceño
well until third-quarter 2012 after it has learned the results of
the Samaria well, enabling the company to appropriately size needed
production facilities and await required government approvals.
“We are excited to report our first exploration discovery in
Colombia. We plan to proceed immediately to drill the nearby
Samaria Norte-1 prospect during the second quarter. We are hopeful
that our exploration in Colombia, together with our exploration of
the Vaca Muerta formation in Argentina, can make solid
contributions to the future growth of our company,” said Thomas
Bueno, Apco’s president and chief operating officer.
“In addition, we are quite pleased with the results of our
development drilling activities this year. Although our earnings
during the quarter were up primarily due to increased prices, a 5
percent increase in oil sales volumes from both our consolidated
and equity interests compared with first-quarter 2011 made a strong
contribution to our improved earnings,” Bueno added.
Dividend Update
Apco’s board of directors has decided to suspend paying a
regular quarterly dividend. Most recently, the company had been
paying a regular quarterly dividend of 2 cents per share on the
company’s shares.
The reduction in the dividend compared with prior periods is
designed to provide additional resources for potential investment
opportunities and capital for expected development of recent
exploration successes as described in this press release.
Apco Oil and Gas International Inc. Summary of
Earnings (In Thousands of Dollars Except Per Share Amounts)
2012
2011 Three months ended March 31
Operating revenue 30,076
23,083 Costs and operating expenses
25,026 17,260 Investment income 8,338
4,866 Net income attributable to Apco
10,076 8,160 Per share 0.34 0.28
About Apco Oil and Gas International Inc. (NASDAQ:
APAGF)
Apco Oil and Gas International Inc. is an international oil and
gas exploration and production company with interests in nine oil
and gas concessions and two exploration permits in Argentina, and
three exploration and production contracts in Colombia. More
information is available at www.apcooilandgas.com. Go to
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Our reports, filings, and other public announcements may contain
or incorporate by reference statements that do not directly or
exclusively relate to historical facts. Such statements are
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We make these forward
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"planned," "potential," "projects," "scheduled," "will" or other
similar expressions. These forward-looking statements are based on
management's beliefs and assumptions and on information currently
available to management and include, among others, statements
regarding:
- Amounts and nature of future capital
expenditures;
- Volumes of future oil, natural gas, and
LPG production;
- Expansion and growth of our business
and operations;
- Financial condition and liquidity;
- Business strategy;
- Estimates of proved gas and oil
reserves;
- Reserve potential;
- Development drilling potential;
- Cash flow from operations or results of
operations;
- Seasonality of natural gas demand;
and
- Oil and natural gas prices and
demand.
Forward-looking statements are based on numerous assumptions,
uncertainties and risks that could cause future events or results
to be materially different from those stated or implied in this
announcement. Many of the factors that will determine these results
are beyond our ability to control or predict. Specific factors that
could cause actual results to differ from results contemplated by
the forward-looking statements include, among others, the
following:
- Availability of supplies (including the
uncertainties inherent in assessing, estimating, acquiring and
developing future oil and natural gas reserves), market demand,
volatility of prices, and the availability and cost of
capital;
- Inflation, interest rates, fluctuation
in foreign currency exchange rates, and general economic conditions
(including future disruptions and volatility in the global credit
markets and the impact of these events on our customers and
suppliers);
- The strength and financial resources of
our competitors;
- Development of alternative energy
sources;
- The impact of operational and
development hazards;
- Costs of, changes in, or the results of
laws, government regulations (including climate change regulation
and/or potential additional regulation of drilling and completion
of wells), environmental liabilities and litigation;
- Political conditions in Argentina,
Colombia and other parts of the world;
- The failure to renew participation in
hydrocarbon concessions granted by the Argentine government on
reasonable terms;
- Risks related to strategy and
financing, including the availability and cost of credit;
- Risks associated with future weather
conditions, volcanic activity and earthquakes;
- Acts of terrorism; and
- Additional risks described in our
filings with the Securities and Exchange Commission ("SEC").
Given the uncertainties and risk factors that could cause our
actual results to differ materially from those contained in any
forward-looking statement, we caution investors not to unduly rely
on our forward-looking statements. We disclaim any obligations to
and do not intend to update the above list or to announce publicly
the result of any revisions to any of the forward-looking
statements to reflect future events or developments.
In addition to causing our actual results to differ, the factors
listed above may cause our intentions to change from those
statements of intention set forth in this announcement. Such
changes in our intentions may also cause our results to differ. We
may change our intentions, at any time and without notice, based
upon changes in such factors, our assumptions, or otherwise.
Investors are urged to closely consider the disclosures and risk
factors in our most recent annual report on Form 10-K filed with
the SEC and our quarterly reports on Form 10-Q available from our
offices or from our website at www.apcooilandgas.com.