Apco Oil and Gas International Inc. (NASDAQ:APAGF) today announced that for the three and six-month periods ended June 30, 2012, it generated unaudited net income attributable to Apco of $12.7 million and $22.8 million, or $0.43 and $0.77 cents per share, compared with net income of $7.7 million and $15.9 million for the same periods in 2011. Net income improved quarter-to-quarter from increased operating revenues due to higher average sales prices and increased volumes, greater equity income from Apco’s Argentine investment and a one-time credit to other income attributable to the farm-out of part of the company’s interest in the exploration area within the Sur Rio Deseado Este concession. These improvements were partially offset by higher costs and operating expenses that included increases in production and lifting costs, depreciation expense, exploration expense, taxes other than income and income taxes. The increase in net income for the year-to-date period is also due primarily to higher average oil sales prices and increased volumes, greater equity income from Apco’s Argentine investment, and other income. These improvements over last year were partially offset by higher costs and operating expenses that included a $6.6 million increase in exploration expense compared with the first six months of 2011. During 2012, Apco incurred significant 3D seismic costs in its Sur Rio Deseado property in Argentina and in the Llanos 40 block in Colombia. Higher average sales prices were the largest contributor to the increase of $8.4 million in operating revenues during the quarter and $15.4 million for the first six months. Total sales volumes applicable to Apco’s consolidated interest on a barrel of oil equivalent (BOE) basis were 1.5 percent higher than second-quarter 2011 and 3 percent higher than the first six months of 2011. Total costs and operating expenses for the quarter and the six months increased by $4.2 million and $12 million, respectively, primarily the result of higher production and lifting costs, depreciation expense, exploration expense and higher taxes other than income.
The benefits of higher average sales prices and increased volumes also led to greater equity income from its Argentine investment for the second quarter and the first half of 2012 compared with the same periods in 2011.In May 2012, the Argentine congress approved a law that expropriated 51 percent of the shares of YPF S.A., previously owned by Repsol S.A., and declared that the oil and gas sector in Argentina was a matter of public interest. Consistent with that declaration, in July 2012 President Kirchner issued a decree giving the federal government increased control over the oil and gas industry that, among other matters, includes assuring reasonable hydrocarbon prices in the country and the approval of capital spending plans to be submitted annually by oil and gas companies. “Ultimately, it will take some time to see how these actions play out,” said Ralph Hill, Apco’s chief executive officer. “In the meantime, we’ll continue to build on our track record of active exploration and development that has resulted in increases in both production and reserves over the years,” Hill added. 2012 Capital Program and Operational Update During the first six months of 2012, capital expenditures of $26.1 million were invested primarily in development drilling in its Neuquén basin properties and exploration drilling in Colombia. In Argentina, development drilling in Apco’s core Neuquén basin properties is on schedule, with results in line with expectations. In Colombia, the company has drilled two exploration wells in the Llanos 32 block. The first of these, the Maniceño 1 well, reached a measured depth of 11,027 feet and encountered approximately 50 feet of oil column in the Mirador formation. This well was put into production on July 6. Daily production rates have since ranged from 1,500 to 3,200 barrels of oil per day. On May 26, Apco’s second exploration well in Llanos 32, the Samaria Norte 1 well, was spud and recently reached its target of 11,000 feet. Subsequent logging activities encountered prospective oil pays in the Gacheta, Guadaloupe and Mirador formations, and casing was set in the well. A completion rig has been mobilized to test each of these prospective oil zones.
Also in Colombia, Apco completed the acquisition of 305 square kilometers of 3D seismic over the Llanos 40 block in the second quarter. The data processing and interpretation phase is under way, with exploration drilling expected to commence in 2013.“We are pleased with the results of our development drilling in the Neuquén basin where we have a sizeable inventory of wells left to drill. Drilling results there in 2012 have enabled us to achieve year-over-year increases in production,” said Thomas Bueno, Apco’s chief operating officer. “The positive results of our exploration efforts in Colombia, including the Maniceño discovery and the prospects for testing our Samaria Norte well, give us hope that Colombia can make a solid contribution to the future growth of Apco,” Bueno added.
|Apco Oil and Gas International Inc.|
|Summary of Earnings|
|(In Thousands of Dollars Except Per Share Amounts)|
|Three months ended June 30|
|Costs and operating expenses||23,249||19,026|
|Net income attributable to Apco||12,680||7,699|
|Six months ended June 30|
|Costs and operating expenses||48,275||36,284|
|Net income attributable to Apco||22,756||15,861|
- 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.
- 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 exchange rates, tax rate changes, 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").