Reflects Effect on Equity Investment from New
Tax Legislation in Argentina
Apco Oil and Gas International Inc. (NASDAQ:APAGF) today
reported an unaudited net loss attributable to Apco of $6.0 million
for the third-quarter 2013, or a loss of $0.21 per share, compared
with net income of $10.2 million, or $0.35 per share, in the same
period a year ago.
For the first nine months of 2013, Apco reported unaudited net
income of $17.4 million, or $0.59 per share, compared with net
income of $33.0 million, or $1.12 per share, for the same period in
2012.
The decrease in net income for the three and nine month periods
ended Sept. 30, 2013, compared with the same periods in 2012, is
primarily the result of a non-cash deferred income tax charge of
$13.7 million related to new tax legislation enacted by the
Argentine government in the third quarter of 2013.
Absent the deferred income tax charge, adjusted net income would
have been $7.7 million, or $0.26 per share, and $31.1 million, or
$1.06 per share, for the three and nine months ended Sept. 30,
2013.
In September 2013, the Argentine government enacted certain tax
reform legislation related to dividends and capital gains. The tax
reform imposes a 10 percent tax on dividends, profit distributions
and remittances made to Argentine individuals and foreign
shareholders. The 10 percent dividend tax will apply to Apco on
future dividends received from its 40.72 percent interest in
Petrolera Entre Lomas S.A. (Petrolera), branch remittances, and any
dividends paid by its subsidiaries.
The tax reform also removes the income tax exemption on income
derived from the sale of shares, titles, bonds and other securities
that has been provided to non-Argentine residents since 1991.
Effective immediately, the sale of such securities is subject to an
effective 13.5 percent capital gain tax on the gross proceeds.
Consequently, Apco recorded the deferred tax expense in the third
quarter of 2013 for the new Argentine capital gains tax associated
with its equity investment in Petrolera.
“We hold a significant portion of our business through our share
ownership in Petrolera. Unfortunately, Argentina has made a change
to its income tax law which resulted in a non-cash deferred income
tax charge for the period,” said Ralph Hill, Apco’s chief executive
officer.
“Going forward, this new tax will impact our overall effective
income tax rate. In the meantime, we’ll continue the prudent
exploration and development of our assets we have employed for many
years,” Hill added.
Other factors contributing to the decrease in net income for the
quarter and year-to-date periods were lower sales volumes, greater
costs and operating expenses and lower equity income from Argentine
investment.
Total operating revenues decreased by $1.3 million during the
third quarter of 2013 compared with the same period in 2012,
primarily due to lower sales volumes.
Total operating revenues increased by $12.7 million during the
first nine months of 2013 compared with the same period a year ago.
Sales revenues from Apco’s Colombian operations and benefits
realized from the Oil Plus hydrocarbon subsidy program in Argentina
were the primary drivers of higher operating revenues experienced
in 2013.
Total sales volumes applicable to Apco’s consolidated interest
on a barrel of oil equivalent (BOE) basis were 11 and 2 percent
lower than the third quarter and first nine months of 2012. The
change in volumes for both periods reflects a decline in volumes
from Apco’s Argentine operations, partially offset by the positive
impact of volumes from its Colombian operations which began
production during the third quarter of 2012.
Total costs and operating expenses were higher for the quarter
and first nine months of 2013 compared with the same periods of
2012 primarily due to higher production and lifting costs,
depreciation expense, selling and administrative expense, and
higher foreign exchange losses. The quarter and year-to-date
periods also benefited from lower exploration expense compared with
2012.
Apco also experienced lower equity income from its 40.72 percent
interest in Petrolera. During the third quarter and first nine
months of 2013, the impact of lower operating revenues and higher
operating costs contributed to a decrease of $2.2 million and $6.5
million in equity income from Argentine investment compared with
the comparable periods in 2012.
2013 Capital Program and Operational Update
During the first nine months of 2013, capital expenditures of
$40.9 million attributable to Apco’s consolidated interests were
invested primarily in development and exploration drilling in
Neuquén basin properties and exploration drilling in Colombia.
Apco participated in the drilling of 20 development wells and
three exploration wells in the Neuquén basin in the first nine
months of the year. An additional three wells were in various
stages of drilling and completion at the end of the quarter.
In Colombia, Apco participated in the drilling of two wells in
the Llanos 32 block. The Bandola-1 well was put on production in
the second quarter. The second well was determined to be
unproductive.
“Year-to-date, we are behind on our drilling activities planned
for 2013. Due to increased industry drilling activity in Argentina,
we have experienced significant delays to obtain equipment to drill
planned wells in our Coirón Amargo, Tierra del Fuego and Sur Río
Deseado properties,” said Michael Kyle, Apco’s president and chief
operating officer.
“We expect to build momentum in those areas in the fourth
quarter. The lack of available drilling equipment has hampered our
progress to stem normal production declines from our mature
properties so far this year,” Kyle added.
Apco Oil and Gas International
Inc.
Summary of Earnings (In Thousands of Dollars Except Per
Share Amounts)
2013 2012 Three months ended Sept. 30
Operating revenue
33,672 34,966 Costs and operating
expenses 27,651 27,552
Investment income 4,482 6,363
Net income (loss) attributable to Apco (6,038 )
10,231 Per share (0.21 )
0.35
2013
2012 Nine months ended Sept. 30
Operating revenue 110,741
98,009 Costs and operating expenses 84,777
75,827 Investment income 16,069
21,864 Net income attributable to Apco
17,415 32,987 Per share
0.59 1.12
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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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
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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 restrictions stemming from our loan agreement
and 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.
for Apco Oil and Gas International Inc.Media
Contact:Kelly Swan, 539-573-4944orInvestor Contact:David
Sullivan, 539-573-9360