Apco Reports Third-Quarter 2013 Results
Reflects Effect on Equity Investment from New Tax Legislation in Argentina
TULSA, Okla. -- November 7, 2013
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
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)
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
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 http://www.b2i.us/irpass.asp?BzID=1671&to=ea&s=0
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(including climate change regulation and/or potential additional
regulation of drilling and completion of wells), environmental liabilities
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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
for Apco Oil and Gas International Inc.
Kelly Swan, 539-573-4944
David Sullivan, 539-573-9360
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