Pan American Energy LLC, Argentine Branch
Translation from the original prepared in Spanish for publication in Argentina
PAN AMERICAN ENERGY LLC
(ARGENTINE BRANCH)
FINANCIAL STATEMENTS AS OF MARCH 31, 2008
AND COMPARATIVE INFORMATION
CONTENTS
Limited review report on interim financial statements
Legal information
Balance sheet
Statement of income
Statement of cash flows
Notes to the financial statements
Exhibits A, B, C, D, E, F, G, H and I 20
Reporting summary
Supplementary information required by the Buenos Aires Stock Exchange 39
REVIEW REPORT ON INTERIM FINANCIAL STATEMENTS
To the Legal Representative of
Pan American Energy LLC (Argentine Branch)
Av. Leandro N. Alem 1180 - 11th Floor
Buenos Aires, Argentina
We reviewed the accompanying balance sheet of Pan American Energy LLC (Argentine
Branch) as of March 31, 2008, and the related statements of income and cash
flows, notes 1 to 15 and exhibits A, B, C, D, E, F, G, H and I for the
three-month period then ended, comparative with the same period of the prior
year, and in the case of the balance sheet and the related notes and exhibits,
with the financial statements as of December 31, 2007. The preparation of these
financial statements is the responsibility of the Legal Representative of the
Branch.
We conducted our review in accordance with auditing standards generally accepted
in the Republic of Argentina applicable to the limited scope review of interim
financial statements. A review of interim financial information consists
principally in applying analytical procedures to the accounting data and making
inquiries of the individuals responsible for its preparation. As a review is
substantially less in scope than an audit of annual financial statements, we do
not express an opinion on the financial position of the Branch as of March 31,
2008, nor on the results of its operations and the cash flows for the
three-month period then ended.
The accompanying consolidated financial statements were translated into the
English language from those issued in Spanish in conformity with accounting
principles and reporting practices adopted by the regulations of the National
Securities Commission ("CNV") of Argentina.
In relation to the financial statements as of December 31, 2007, presented for
comparative purposes, we issued an unqualified opinion on March 7, 2008. In
addition, on May 10, 2007, we issued an unmodified review report on the
financial statements for the three months ended March 31, 2007, also presented
for comparative purposes.
Based on our review, we report that the financial statements as of March 31,
2008 and for the three months then ended referred to in the first paragraph
consider all the significant facts and circumstances of which we became aware
during our review and in relation to them we have no significant observations.
In compliance with rules and regulations in force, we report that:
a) the financial statements comply with the provisions of the Corporations Law
and the regulations on accounting documentation of the National Securities
Commission, they are transcribed in the Inventory Book and they derive from the
accounting records of the Branch maintained in the Republic of Argentina timely
authorized by the Inspection Board of Legal Entities (IGJ). Following its
submission of the special report required by section 287 of Resolution 7/2005 of
the IGJ, the Branch has not received the certification from such authorities
acknowledging compliance. The information systems used to process the financial
information included in the financial statements are maintained under the
security and integrity conditions based on which they were authorized;
b) we read the reporting summary (sections "Balance sheet items", "Income
statement items", "Statistical data" and "Ratios") and the supplementary
information to the financial statements required by section 68 of the
regulations of the Buenos Aires Stock Exchange and, based on our review as far
as it relates to our area of responsibility, we have no observations, and
c) as of March 31, 2008, the accrued liability for pension contributions arising
from the accounting records amounted to $ 3,946,816, no amounts being due as of
that date.
Buenos Aires, May 9, 2008
SIBILLE
Graciela C. Laso
Partner
FINANCIAL STATEMENTS as of March 31, 2008 for the three-month period beginning
January 1, 2008 and ended March 31, 2008 and comparative information
Stated in pesos
Legal address of the Branch: Av. Leandro N. Alem 1180 - 11th floor - Buenos
Aires
Main activity of the Branch: Oil and gas exploration and production
Date of registration with the Public Registry of Commerce: October 17, 1997
Registration number with the Inspection Board of Legal Entities: 1868, Book 54,
Volume B of Foreign Companies
Capital registered with the Inspection Board of Legal Entities: $ 200,000,000
under number 1257, Book 57, Volume B of Foreign Companies, and $ 21,779,007
under number 2106, Book 58, Volume B of Foreign Companies (Note 8)
Date of registration of capital with the Inspection Board of Legal Entities:
$ 200,000,000 on July 11, 2003 and $ 21,779,007 on December 12, 2005
Subscribed capital (paid in full): $ 221,779,007
HEAD OFFICE
Name: Pan American Energy LLC
Legal address: The Corporation Trust Company, Trust Corporation Center, 1209
Orange Street, Wilmington, Delaware - 19801 - United States of America
Main activity: Oil and gas exploration and production
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
BALANCE SHEET as of March 31, 2008 and as of December 31, 2007 (in pesos)
03/31/2008 12/31/2007
------------------ ------------------
ASSETS
CURRENT ASSETS
Cash on hand and in banks (Note 4 a) 32,090,884 33,987,608
Investments (Exhibit C) 604,362,551 451,093,477
Accounts receivable (Note 4 b) 900,802,554 497,884,676
Other receivables (Note 4 c) 97,394,437 88,459,852
Inventories (Note 4 d) 243,403,513 189,479,197
------------------ ------------------
Total current assets 1,878,053,939 1,260,904,810
------------------ ------------------
NON CURRENT ASSETS
Other receivables (Note 4 e) 53,319,572 53,139,229
Investments (Exhibit C) 8,750,088 9,533,846
Property, plant and equipment (Exhibit A) 7,810,773,395 7,383,251,413
Intangible assets (Exhibit B) 379,713 390,469
------------------ ------------------
Total non current assets 7,873,222,768 7,446,314,957
------------------ ------------------
Total assets 9,751,276,707 8,707,219,767
================== ==================
LIABILITIES
CURRENT LIABILITIES
Accounts payable (Note 4 f) 745,382,012 645,049,836
Loans (Note 4 g) 908,809,960 745,307,677
Payroll and social security contributions 26,390,669 42,426,954
Taxes payable (Note 4 h) 272,941,356 271,153,439
Provision for future compensation to personnel
(Exhibit D) 2,476,055 2,461,743
------------------ ------------------
Total current liabilities 1,956,000,052 1,706,399,649
------------------ ------------------
NON CURRENT LIABILITIES
Accounts payable (Note 4 i) 49,167,122 49,129,413
Loans (Note 4 j) 3,377,008,800 2,984,559,219
Other liabilities (Note 3.2.j) 135,119,531 128,930,896
Deferred tax (Notes 3.2.h and 11) 394,874,576 389,697,321
Provision for future compensation to personnel
(Exhibit D) 15,896,735 15,241,426
Provision for environmental remediation (Exhibit D) 82,650,048 82,182,464
Accruals (Exhibit D) 20,966,145 20,217,498
------------------ ------------------
Total non current liabilities 4,075,682,957 3,669,958,237
------------------ ------------------
Total liabilities 6,031,683,009 5,376,357,886
Account with Head Office (Note 7) 3,258,354,691 2,869,622,874
Capital allocated to the Branch (Note 8) 221,779,007 221,779,007
Capital adjustment 239,460,000 239,460,000
------------------ ------------------
Total 9,751,276,707 8,707,219,767
================== ==================
The accompanying notes and exhibits are an integral part of these financial
statements.
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
STATEMENT OF INCOME for the three-month period beginning January and ended
December 31, 2008 comparative with the prior year (in pesos)
2008 2007
(three months) (three months)
---------------------------- ----------------------------
Sales 1,468,875,654 1,357,688,556
Cost of sales (Exhibit E) ( 702,878,558) ( 675,501,854)
--------------- --------------
Gross profit 765,997,096 682,186,702
Administrative expenses (Exhibit G) ( 64,856,042) ( 56,002,910)
--------------- --------------
Operating income 701,141,054 626,183,792
Financial results
Generated by assets
Interest 3,741,150 9,020,029
Exchange gains/losses 5,159,254 13,784,807
Other financial results 18,357 8,918,761 911,972 23,716,808
------------ -------------
Generated by liabilities
Interest (69,389,703) (63,875,109)
Exchange gains/losses (24,559,810) (32,079,825)
Other financial results ( 7,786,549) ( 101,736,062) ( 6,072,501) ( 102,027,435)
------------ -------------
Other income and expenses - net ( 2,065,569) ( 1,977,433)
--------------- --------------
Income before income tax 606,258,184 545,895,732
Income tax expense - current (Note 3.2 h
and 11) ( 212,349,112) ( 204,821,539)
Income tax (expense) benefit - deferred
(Note 3.2.h and 11) ( 5,177,255) 18,218,711
--------------- --------------
Net income (Note 7) 388,731,817 359,292,904
=============== ==============
The accompanying notes and exhibits are an integral part of these financial
statements.
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
STATEMENT OF CASH FLOWS for the three-month period beginning January 1 and ended
March 31, 2008 comparative with the same period of the prior year (in pesos)
2008 2007
------------- --------------
(3 months) (3 months)
Cash provided by operations:
Net income 388,731,817 359,292,904
Adjustment to reconcile net income with the cash provided by
operations
Depreciation of Property, Plant and Equipment 191,083,279 200,991,260
Amortization of intangible assets 10,756 405,814
Income tax expense 212,349,112 204,821,539
Net increase in allowances for bad debtors,
lawsuits and obsolescence of materials 1,059,042 888,820
Gain (loss) on property, plant and equipment ( 216,993) 23,864
Increase in provision for future compensation to personnel 1,246,407 740,000
Net increase in the provision for environmental remediation 218,799 ( 1,394,865)
Other non-cash items (1) 91,033,755 54,348,401
Changes in assets, liabilities and account with Head Office:
(402,917,878) 62,555,598
(Increase) decrease in accounts receivable ( 53,924,316) 71,429,672
(Increase) decrease in inventories ( 8,934,585) 26,947,829
(Increase) decrease in other current receivables ( 180,343) ( 719,819)
Increase in other non current receivables 102,645,596 (152,156,727)
(Increase) decrease in accounts payable, payroll and social
security contributions,
taxes payable and other liabilities ( 576,786) ( 504,506)
Compensation paid to personnel for benefit plans ( 310,395) -
Payments related to lawsuits (222,684,556) (157,763,032)
------------- --------------
Income tax paid 298,632,711 669,906,752
============= ==============
Net cash provided by operations
Cash used in investing activities:
Decrease (increase) in long-term investments 783,758 ( 5,759,900)
Acquisition of property, plant and equipment (618,369,625) (454,668,020)
Additions of intangible assets - ( 46,773)
Collection due to the sale of property, plant and equipment 230,142 7,780
------------- --------------
Cash used in investing activities (617,355,725) (460,466,913)
------------- --------------
Cash provided by (used in) financing activities:
Increase in loans (net) 470,095,364 230,287,065
Net activity with Head Office - ( 21,582,772)
------------- --------------
Cash provided by (used in) financing activities 470,095,364 208,704,293
------------- --------------
Net increase in cash 151,372,350 418,144,132
Cash at beginning of period (2) 485,081,085 249,407,237
------------- --------------
Cash at the end of the period (2) 636,453,435 667,551,369
============= ==============
(1) It is made up of:
Exchange gains/losses and other financial results
relating to loans and other 85,856,500 72,567,112
Deferred income tax benefit 5,177,255 ( 18,218,711)
Total 91,033,755 54,348,401
(2) Cash and banks plus investments becoming due in a period not exceeding three
months.
The accompanying notes and exhibits are an integral part of these financial
statements.
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
NOTES TO THE FINANCIAL STATEMENTS as of March 31, 2008 and comparative
information (in pesos)
NOTE 1 - THE BRANCH
Pan American Energy LLC (Argentine Branch) is engaged in the exploration,
development and production of hydrocarbons.
On October 30, 1997, a definitive agreement for the transfer of assets and
liabilities was entered into between Amoco Argentina Oil Company (Argentine
Branch) and Pan American Energy LLC (Argentine Branch) hereinafter "the Branch",
whereby Amoco Argentina Oil Company (Argentine Branch) transferred its business
consisting of assets and liabilities to the Branch, effective on October 8,
1997.
On May 1, 1998 a definitive agreement for the transfer of assets and liabilities
was entered into between Pan American Continental S.R.L. and the Branch, whereby
Pan American Continental S.R.L. transferred to the Branch its business
consisting of the assets and liabilities except for the name Pan American
Continental.
NOTE 2 - OPERATIONS OF THE BRANCH
The following table summarizes the main operations, blocks and joint ventures in
which the Branch is or was involved during the three-month period ended March
31, 2008.
Activity operations interest participation
------------------------------------------- -------------------------------------- ------------------
Oil and gas production and development Cerro Drag�n 100.00% Operator
Piedra Clavada 100.00% Operator
Koluel Kaike 100.00% Operator
Lindero Atravesado 62.50% Operator
Anticlinal Funes 80.00% Operator
Acambuco Operator Aguada
Pichana 18.18%
52.00% Non operator
San Roque 16.47% Non operator
Estancia La Escondida (1) 25.00% Non operator
Oil and gas exploration and development Acambuco "B" 100.00% Operator
Bandurria 18.18% Non operator
Costa Afuera Argentina "CAA-40" 50.00% Non operator
Costa Afuera Argentina "CAA-46" 50.,00% Non operator
Centro Golfo San Jorge Marina Chubut 90.00% Operator
Explanations:
(1) The Joint Venture agreement (UTE) governing the relationships between the
holders of concession states that their participating interests in rights,
obligations and interests inherent in the property including production, will be
distributed based on the depth from which production is obtained: in the deep
area, the Branch has a 75% interest and the co-holder has the remaining 25%; in
the shallow area from which current total production is obtained, the Branch has
a 25% interest and the co-holder the remaining 75%; and in the area
"Descubrimiento El Zanj�n", both parties hold a 50% interest. The average
interest described grants the Branch a 50% interest in the rights over the
property, regardless the percentage thereof in the concession.
NOTE 3 - ACCOUNTING PRINCIPLES
3.1 Reporting currency
In accordance with Decree 664/2003 and General Resolution No. 441/2003 of the
National Securities Commission ("Comisi�n Nacional de Valores" or CNV), the
Branch discontinued the application of inflation accounting as from March 1,
2003.
From January 1, 2002 to February 28, 2003, the Branch applied the inflation
accounting methodology set forth by Technical Resolution No. 6, amended by
Technical Resolutions Nos. 17 and 19 of the Argentine Federation of Professional
Councils of Economic Sciences (FACPCE) and by the Professional Council of
Economic Sciences of the City of Buenos Aires (CPCECABA), using indexes derived
from the Internal Wholesale Price Index.
3.2 Valuation and presentation principles
a) Presentation
The financial statements are presented in accordance with the presentation
principles established by the accounting standards generally accepted in the
Republic of Argentina and pursuant to the provisions of the CNV.
Investments to become due or to be realized in the short term (within 3 months
of period end) are considered a cash equivalent in the statement of cash flows.
Certain reclassifications were made to the financial statements presented as
comparative information to conform them to the presentation used in this fiscal
year.
b) Participating interest in joint ventures
The Branch is engaged in exploration and production activities in certain areas
through its participation in joint ventures with other companies. The account
balances reflecting the joint ventures' assets, liabilities, income and expenses
are proportionately consolidated in these financial statements.
c) Foreign currency
Assets and liabilities denominated in foreign currency as listed in Exhibit F
have been stated in Argentine Pesos at the exchange rate prevailing at the end
of each fiscal period. The resulting exchange gains/losses are presented in the
financial results line (provided by either assets or liabilities, as applicable)
of the Statement of Income.
d) Inventories
Crude oil is stated at reproduction cost. Spare parts, materials and raw
materials are stated at the latest acquisition cost. Goods in transit are stated
at acquisition cost plus import expenses. Advances to suppliers are valued at
the amounts actually incurred.
The carrying value of inventories, taken as a whole and after considering the
allowance for obsolescence (see Note 3.2.g), does not exceed their recoverable
value.
e) Property, plant and equipment
Property, plant and equipment are stated at acquisition cost as indicated in
Note 3.1 less the related accumulated depreciation. The acquisition cost
includes all the necessary costs incurred in order to put the assets in working
condition.
Depreciation is calculated by applying the straight-line method over the
estimated useful lives of the assets and/or the duration of the contracts, as
applicable, except for production wells, equipment and services, which are
depreciated as per the units of production method.
The pre-operating costs of the properties in the exploration stage, except for
geology and geophysics related expenses that are charged to the Statement of
Income as incurred, remain capitalized for a given period based on the
characteristics of each property, without exceeding five years considered as
from the completion of the exploration stage or, if applicable, as from
production interruption, unless:
1. it is expected that explored areas will proceed to the commercial production
stage, in which case the referred costs remain capitalized, or
2. during the referred five year period, management estimates that commercial
production will not be feasible, in which case, the referred costs are expensed.
For Property, plant and equipment existing as of January 6, 2002, the
acquisition or construction of which resulted in outstanding liabilities
denominated in foreign currency - exchange gains/losses resulting from restating
such liabilities totaling $1,832,303,600 through July 28, 2003 were capitalized
pursuant to specific accounting principles, based on the determination of the
direct or indirect ratio between the assets subject to capitalization and the
outstanding liabilities in foreign currency. The assets or group of assets
eligible for the capitalization of exchange gains/losses have remained
unchanged. Such capitalization of exchange gains/losses was performed in
proportion to the balance of the original value of the referred assets not
subject to depreciation. Additionally, exchange gains and losses were
capitalized up to the limit arising from the comparison between the replacement
or reproduction cost of the assets and their recoverable value.
For the purposes of presenting the financial statements in constant currency
(see Note 3.1), the capitalized exchange gains/losses amounting to $
1,832,303,600 are considered an anticipated inflation adjustment until such
differences are absorbed thereby. The excess of capitalized exchanges losses
over the amounts in constant currency totals $ 85,358,131 as of March 31, 2008.
The net carrying value of property, plant and equipment, taken by group of
assets of similar characteristics, does not exceed their estimated value in use
based on the information available as of the date of issuance of the financial
statements.
f) Intangible assets
These are pre-production geological expenditures and acquisition cost of blocks
valued at restated cost as indicated in Note 3.1., less the related accumulated
amortization. Amortization is calculated as per the units of production method.
g) Allowances, Provisions and Accruals
Allowances deducted from assets:
- For bad debtors: they are determined following the detailed analysis of the
credit status of each customer.
- For obsolescence of materials: the Branch creates an allowance for those
assets evidencing significant slow movement based on a specific analysis.
Accruals:
- For lawsuits: they are determined considering the potential costs of those
lawsuits filed against the Branch based on the opinion of the legal counsels.
Provisions:
- For future compensation to personnel: they are estimated as a percentage of
compensation paid, calculated in terms of actuarial methods, and can be applied
to compensate employees of the Branch who have complied with certain seniority
requirements defined by the Branch. Payments are debited from the related
provision.
- For environmental remediation: calculated on the basis of well-abandonment
forecasts until the expiration of agreements, at present values.
h) Income tax
The Branch applies the deferred tax method to account for income tax. Based on
the referred method, the current income tax is calculated by applying the rates
prevailing as of March 31, 2008 and 2007 on taxable income; and the future tax
effect of the temporary differences in the book and tax values of assets and
liabilities and the tax loss carryforwards, if any, are recognized as deferred
tax assets or liabilities. The adjustment for inflation of property, plant and
equipment as described in note 3.2.e) is considered to be a temporary difference
for deferred tax computations.
The deferred tax assets are recognized only to the extent of their
recoverability.
i) Use of estimates
The preparation of the financial statements in accordance with generally
accepted accounting principles requires that the Branch management makes
estimates about the value of certain assets and liabilities, including
contingent liabilities, as well as the amounts informed of certain income and
expenses generated during the fiscal period.
The final amounts may differ from the estimates used in the preparation of the
financial statements.
j) Defined benefit pension plans
The Branch implemented a pension plan for the benefit of its personnel called
"Plan Puente" or "Bridge Plan". The amount accrued upon the implementation of
such plan as of March 31, 2008 amounts to $ 135,119,531 ($ 128,930,896 as of
December 31, 2007) presented under Other non current liabilities, out of which
the amount of $ 6,284,343 accrued in the three-month period ended December 31,
2008. Such amount is made up of $ 250,811,178 of nominal value less
$ 115,292,099 corresponding to the financial effect from the discount to present
value and payments in the amount of $ 399,547.
k) Revenue recognition
Revenue derived from the sale of hydrocarbons is recognized when the significant
risks and rewards of ownership have been transferred to the purchaser.
The Branch uses the production method to recognize revenues from the sale of
oil. In those cases where the Branch has a shared interest with other producers,
revenues are recorded upon the basis of the interest held in each joint venture.
In order to recognize revenues from the sale of gas, the Branch uses the sales
method, whereby these revenues are recorded on the basis of the actual volumes
delivered to purchasers irrespective of whether they result form the Branch's
own output or from the output shared with other producers.
l) Lease agreements
The Branch leases the space occupied by its offices, which agreements are of an
operating nature and, therefore, the expenses incurred are recognized in the
Statement of income to the extent they are accrued.
The amount of the leases, broken down by maturity dates, is reported below:
Nominal value
Up to one year US$ 2,670,232 and $ 1,212,397
Over one year and up to five years US$ 1,922,616 and $ 1.346,000
During the three-month period ended March 31, 2008, the Branch recognized an
expense of $ 2,400,053 related to such lease agreements presented in the line
Buildings Rentals and Maintenance in Exhibit G.
NOTE 4 - BREAKDOWN OF CERTAIN BALANCE SHEET ACCOUNTS
03/31/2008 12/31/2007
------------------ ------------------
ASSETS
CURRENT ASSETS
a) Cash and banks
Cash on hand in local currency 217,951 219,522
Cash on hand in foreign currency (Exhibit F) 64,583 185,683
Cash in banks in local currency 30,358,668 33,403,569
Cash in banks in foreign currency (Exhibit F) 1,449,682 178,834
------------------ ------------------
Total 32,090,884 33,987,608
================== ==================
b) Accounts receivable
Accounts receivable in local currency 121,815,651 120,830,313
Allowance for bad debtors in local currency (Exhibit D) ( 10,197,186) ( 10,197,186)
Accounts receivable in foreign currency (Exhibit F) 786,506,576 387,251,549
Related companies in foreign currency
(Note 9 and Exhibit F) 2,677,513 -
------------------ ------------------
Total 900,802,554 497,884,676
================== ==================
c) Other receivables
Loans to personnel 8,826,096 9,436,752
Tax credits 6,945,423 11,845,980
Expenses recoverable in local currency 5,240,299 5,105,747
Expenses recoverable in foreign currency (Exhibit F) 2,942,212 1,923,308
Prepaid expenses in local currency 19,093,508 14,164,348
Miscellaneous in local currency 38,195,887 34,220,853
Miscellaneous in foreign currency (Exhibit F) 6,359,872 9,476,145
Affiliated companies in foreign currency (Note 9
and Exhibit F) 9,791,140 2,286,719
------------------ ------------------
Total 97,394,437 88,459,852
================== ==================
d) Inventories
Crude oil in stock 167,948,870 116,679,969
Spare parts, materials and raw materials 63,456,184 56,281,193
------------------ ------------------
Subtotal (Exhibit E) 231,405,054 172,961,162
Allowance for obsolescence of materials (Exhibit D) ( 3,309,418) ( 3,309,418)
------------------ ------------------
Subtotal 228,095,636 169,651,744
Goods in transit 9,367,343 14,921,350
Advances to suppliers in local currency 5,364,319 4,333,388
Advances to suppliers in foreign currency (Exhibit F) 576,215 572,715
------------------ ------------------
Total 243,403,513 189,479,197
================== ==================
03/31/2008 12/31/2007
------------------ ------------------
NON CURRENT ASSETS
e) other receivables
Loans to personnel 12,152,286 11,037,708
Prepaid expenses in local currency 1,009,865 1,377,539
Miscellaneous in local currency 26,048,900 26,419,281
Miscellaneous in foreign currency (Exhibit F) 14,108,521 14,304,701
------------------ ------------------
Total 53,319,572 53,139,229
================== ==================
LIABILITIES
CURRENT LIABILITIES
f) Accounts payable
Trade payables in local currency 562,887,085 440,920,083
Trade payables in foreign currency (Exhibit F) 144,089,130 159,701,798
Expenses payable in local currency 34,155,753 39,244,409
Affiliated companies in foreign currency (Note 9 and
Exhibit F) 4,250,044 5,183,546
------------------ ------------------
Total 745,382,012 645,049,836
================== ==================
g) Loans
Unsecured notes payable in local currency 208,947,467 263,824,044
Unsecured notes payable in foreign currency
(Exhibit F) 621,158,012 405,650,487
Interest accrued on bonds and notes payable in foreign
currency (Exhibit F) 78,704,481 75,833,146
------------------ ------------------
Total 908,809,960 745,307,677
================== ==================
h) Taxes payable
Income tax provision net of advanced payments 163,625,037 174,142,115
Tax on sales and production 101,730,342 87,217,728
Other 7,585,977 9,793,596
------------------ ------------------
Total 272,941,356 271,153,439
================== ==================
03/31/2008 12/31/2007
------------------ ------------------
NON CURRENT LIABILITIES
i) Accounts payable
Miscellaneous liabilities in local currency 31,710,974 31,777,958
Miscellaneous liabilities in foreign currency (Exhibit F) 17,456,148 17,351,455
------------------ ------------------
Total 49,167,122 49,129,413
================== ==================
j) Loans
Bonds in foreign currency (Exhibit F) 1,108,800,000 1,102,150,000
Unsecured notes payable in foreign currency
(Exhibit F) 2,268,208,800 1,882,409,219
------------------ ------------------
Total 3,377,008,800 2,984,559,219
================== ==================
NOTE 5 - ISSUANCE OF BONDS
On February 11, 1997, Amoco Argentina Oil Company (Argentine Branch) issued the
Second Series of bonds in the amount of US$ 100,000,000 due in ten years, at an
annual 6.75% rate. The bonds were paid upon maturity on February 1, 2007. Such
issuance was made under the short and medium term bond program for a total
maximum amount of US$ 200,000,000 authorized by the CNV through Resolution No.
10982 on July 13, 1995.
As a result of the transfer of assets and liabilities referred to in the second
paragraph of Note 1 to these financial statements, Amoco Argentina Oil Company
(Argentine Branch) transferred the above mentioned bonds to Pan American Energy
LLC (Argentine Branch). Such bonds were guaranteed by BP Company North America
Inc. until repayment in February 2007.
On February 21, 2002, through Resolution No. 14123, the CNV authorized the
Global Program for the Issuance of Bonds of Pan American Energy LLC (Argentine
Branch) (the "Global Program") in the total amount of US$ 1,000,000,000.
On October 27, 2004, the Branch issued the Bonds Class 3 in the amount of
US$100,000,000 under the Global Program. The bonds become due in five years
(October 27, 2009) with a 7.125% annual fixed interest rate to be paid on a
half-yearly basis. The price of the issuance was 99.483% of the nominal value.
The funds obtained from this issuance were allocated to investments in property,
plant and equipment and repayment of loans.
On August 9, 2006, the Branch issued the Bonds Class 4 in the amount of US$
250,000,000 under the Global Program, to be repaid in two equal installments
becoming due on February 9, 2011 and February 9, 2012, with interest accruing at
an annual fixed interest rate of 7.75% to be paid on a half-yearly basis. The
price of the issuance was 100.00% of the nominal value. The funds obtained from
this issuance were allocated to investments in property, plant and equipment and
repayment of loans.
The Bonds Class 3 and Class 4 are guaranteed by Pan American Energy LLC.
NOTE 6 - OTHER FINANCIAL LIABILITIES
On July 11, 2005, the Branch obtained from the International Finance Corporation
(IFC) a loan in the amount of US$ 250,000,000 guaranteed by Pan American Energy
LLC and consisting of three tranches:
- "A" in the amount of US$ 100,000,000, with interest accruing at an annual
fixed rate of 7.56%, through an interest rate swap with IFC, amortizable on a
six-month installments basis and becoming due in July 2015;
- "B" in the amount of US$ 135,000,000, at an annual fixed rate of 6.97%,
through an interest rate swap with IFC, amortizable on a six-month installments
basis, and becoming due in July 2012, and
- "C" in the amount of US$ 15,000,000, at an annual fixed base rate of 5.66%
plus additional interest calculated in relation to Pan American Energy LLC�s
economic performance, becoming due in July 2016.
The first repayment of principal for tranches "A" and "B" was made on January
15, 2007.
The funds obtained were used to partially fund the 2005 investment program in
San Jorge Gulf.
On July 13, 2007, the Branch obtained from IFC a loan in the amount of US$
550,000,000, consisting of two tranches that accrue interest at a variable rate:
- "A" in the amount of US$ 150,000,000 amortizable on a six-month installments
basis and becoming due in April 2018; and
- "B", Sub-tranch1" in the amount of US$ 158,500,000 amortizable on a six-month
installments basis and becoming due in April 2014 and Sub-tranch "2" in the
amount of US$ 241,500,000 amortizable on a six-month installments basis and
becoming due in April 2015.
The loan is guaranteed by Pan American Energy LLC and the funds obtained are
being applied to partially fund the investment program that the Company will
undertake in the Cerro Drag�n area in San Jorge Gulf basin located in the
provinces of Santa Cruz and Chubut.
By December 31, 2007, the amount of US$ 400,000,000 of such loan had been
disbursed while the remaining amount of US$ 150,000,000 was disbursed in January
2008.
The Branch considers that its access to credit lines is appropriate in order to
meet its commercial and financial obligations, even though it presents a
negative working capital.
NOTE 7 - ACCOUNT WITH HEAD OFFICE
The changes in the account with Head Office during the fiscal three-month
periods ended March 31, 2008 and 2007 are as follows:
Three-month period ended
-------------------------------------
03/31/2008 03/31/2007
---------------- --------------------
Balance at beginning of period with Head Office 2,869,622,874 1,656,519,921
Net activity with Head Office - ( 21,582,772)
Transfer of income for the period 388,731,817 359,292,904
---------------- --------------------
Net changes for the period 388,731,817 337,710,132
---------------- --------------------
Balance at period-end of the account with Head Office (1) 3,258,354,691 1,994,230,053
================ ====================
(1) of March 31, 2008 and as of March 31, 2007 the balances are in local
currency.
NOTE 8 - CAPITAL ALLOCATED TO THE BRANCH
Pursuant to the Consent Action taken by the members on December 27, 2001, Pan
American Energy LLC allocated capital to the Branch in the amount of $
200,000,000. Such capital is registered with the Public Registry of Commerce. In
accordance with the Consent Action dated February 1, 2005, Pan American Energy
LLC allocated capital to the Branch in the amount of $ 21,779,007. Such capital
contribution represents the contribution of assets and liabilities of the areas
Anticlinal Funes and R�o Barrancas made by Head Office within the scope of the
corporate reorganization registered in the State of Delaware, USA and in the
Public Registry of Commerce of the City of Buenos Aires on December 12, 2005
under number 2106, Book 58, Volume B of Foreign Companies.
NOTE 9 - TRANSACTIONS AND BALANCES WITH AFFILIATED COMPANIES
The transactions and balances with Pan American Energy LLC, the Branch's Head
Office, are disclosed in note 7.
The transactions and balances with affiliated companies are detailed below:
2008 2007
(3 months) (3 months)
TRANSACTIONS
Pan American Fueguina S.A.
Financing - 279,637,517
Pan American Sur S,A,
Lending of LPG - 101,531
PAE E & P Bolivia Ltd,
Purchases and hiring of services 5,123,260 167,217
PAE Oil & Gas Bolivia Ltd,
Purchases and hiring of services 2,381,161 2,781
BP West Coast Products LLC
Sales 810,667,450 317,839,999
BP America Production Company
Contracted services 700,440 1,494,329
BALANCES
BP West Coast Products LLC
Accounts receivable 2,677,513 -
PAE E & P Bolivia Ltd,
Other receivables 6,288,537 1,165,277
PAE Oil & Gas Bolivia Ltd,
Other receivables 3,502,603 1,121,442
BP America Production Company
Accounts payable 2,154,760 1,910,240
Pan American Sur S,A,
Accounts payable 2,095,284 3,273,306
NOTE 10 - GUARANTEES AND OTHER COMMITMENTS
In terms of investment commitments, the Branch has not granted any guarantees as
of March 31, 2008.
The terms agreed in certain loan agreements include commitments assumed by the
Branch referring to the maintenance of certain indebtedness and debt service
ratios and certain restrictions on the distribution of dividends. As of December
31, 2007, the Branch complied with all the commitments assumed in loan
agreements.
The Branch signed the agreement entered into between producers and refineries on
January 2, 2003 for the stability of the prices of crude oil, gasoline and gas
oil (Resolution No. 85/2003 of the Energy Department), in force until April 30,
2004. The Branch has complied with the quotas set forth in the crude oil
agreement. Such deliveries were stated at spot price upon carrying out the
transaction, giving rise to a contingent receivable of $ 11,102,537 as of March
31, 2008, in favor of the Branch, which has not been recorded. Such receivable
will be collected when the crude oil WTI price be lower than US$28.50 per
barrel. The price thereof was US$ 101.59 as of March 31, 2008.
On February 27, 2006 the Branch executed an agreement with Shell C.A.P.S.A.
whereby Shell agreed to pay the Branch a total negotiated price of $86,499,326
in connection with deliveries of crude oil made in 2003 and 2004 under the price
stabilization agreement referred to in the preceding paragraph, and $ 14,032,834
as interest accrued. The Branch agreed to waive further claims in connection
with said deliveries. The related revenue was recognized in the year ended
December 31, 2006. Additionally, in September 2007, the Branch executed an
agreement with ESSO Petrolera Argentina S.R.L., whereby such company agreed a
total negotiated price of $ 7,966,366 in connection with deliveries of crude oil
made in 2003 and 2004 also under the price stabilization agreement referred to
above and $ 2,445,974 as interest. The Branch agreed to waive further claims in
connection with said deliveries. The related revenue was recognized in the
fiscal year ended December 31, 2007.
NOTE 11 - INCOME TAX
The breakdown of the main deferred tax assets and liabilities is as follows:
03/31/2008 12/31/2007
------------------- ------------------
Deferred tax assets
Allowance for materials obsolescence 1,158,296 1,158,296
Provision for future compensation to personnel 6,328,738 6,093,622
Accrual for lawsuits 7,514,989 7,278,725
Provision for environmental remediation 11,565,208 11,231,039
Other provisions and allowances 16,298,895 18,656,518
------------------- ------------------
Total deferred tax assets 42,866,126 44,418,200
------------------- ------------------
Deferred tax liabilities
Inventories - materials and spare parts 890,517 890,517
Property, plant and equipment 404,824,756 392,076,489
Other 32,025,429 41,148,515
------------------- ------------------
Total deferred tax liabilities 437,740,702 434,115,521
------------------- ------------------
Net deferred tax liabilities 394,874,576 389,697,321
=================== ==================
NOTE 11 - INCOME TAX (Cont.)
The reconciliation between the income tax expense for the three-month period and
that resulting from applying the prevailing tax rate to income before tax is as
follows:
2008 2007
------------------- ------------------
(3 months) (3 months)
Income for the three-month period before taxes 606,258,184 545,895,732
Prevailing tax rate 35% 35%
------------------- ------------------
Income for the three-month period at prevailing tax rate (212,190,364) ( 191,063,506)
Permanent differences at the tax rate:
Miscellaneous - net ( 5,336,003) 4,460,678
------------------- ------------------
Subtotal permanent differences at the tax rate ( 5,336,003) 4,460,678
------------------- ------------------
Income tax - total (217,526,367) ( 186,602,828)
=================== ==================
Current income tax expense (212,349,112) ( 204,821,539)
Deferred income tax benefit (expense) ( 5,177,255) 18,218,711
------------------- ------------------
(217,526,367) ( 186,602,828)
=================== ==================
NOTE 12 - RESTRICTED ASSETS
In August 2007, the Branch collected a bank deposit made in its own name as
collateral for a loan from a foreign bank in fiscal year 2005. Such bank deposit
amounted to US$ 1,764,705.
In August 2007, the pledge of two generators was settled in the amount of US$
7,483,776. Such equipment was granted as collateral for outstanding accounts
payable that were paid in June 2007.
Therefore, there are no restricted assets as of March 31, 2008.
NOTE 13 - INFORMATION ON LITIGATION AND OTHER SUPPLEMENTARY MATTERS
Lawsuits were filed against the Branch, particularly with courts in labor and
commercial matters. Based on the information available, the Branch's Management
and legal advisors consider that the contingent liability that might arise from
such lawsuits would not have a material adverse effect on the financial position
of the Branch or the results of its operations.
NOTE 14 - AGREEMENTS WITH THE PROVINCES OF CHUBUT AND SANTA CRUZ
The Branch entered into investment commitments and agreements with the Argentine
provinces of Chubut (04/27/2007) and Santa Cruz (06/25/2007) for the extension
of the term of the concession for hydrocarbon exploitation for a ten-year period
in the blocks known as Cerro Drag�n, the area of which extends over the
territory of both provinces, and Piedra Clavada and Koluel Kaike in the province
of Santa Cruz. The original term of the agreements expired between 2016 and
2017.
These agreements provided for, among other obligations, minimum investments of
US$ 2,000,000,000 in the Province of Chubut and US$ 500,000,000 in the Province
of Santa Cruz to be made before 2017.
operating agreements referred to below.
Furthermore, other investments of US$ 1,000,000,000 in the Province of Chubut
and US$300,000,000 in the Province of Santa Cruz are to be made before 2027 as a
condition for PAE to be granted the operation agreements referred to below.
The agreements also provided for a US$ 80,000,000 investment commitment for
off-shore exploration, at the Branch's own risk, by means of two joint ventures
(UTEs) created with the state-run companies Petrominera (in the case of Chubut)
and Fomicruz (in the case of Santa Cruz). The potential exploration success and
future business activities imply that an additional investment commitment in the
amount of US$500,000,000 be required for the development of the offshore fields.
The creation of the UTEs referred to in the preceding paragraph is consistent
with the provisions of sections 11 and 95 of the Hydrocarbon Law, which allows
state-run companies to enter into agreements and create companies, partnerships
or other associations with individuals or entities for the development of their
activities.
The operation agreements entered into with state-run companies also fall within
the scope of the referred legislation, which shall be effective by the year
2027, subject to compliance with the investment commitments and Pan American
Energy's exploration success in developing sufficient reserves to continue with
the production of the fields of those areas as from that year.
Based on these agreements, during the remaining term of the concessions, the
Branch agreed to pay to the respective provinces an additional amount of 3% of
the net revenues for certain items described in the agreements. The Branch will
also provide money for the development of infrastructure and the economic
diversification of the Provinces of Chubut and Santa Cruz. A number of grants
will be awarded, loans given or guaranteed, job opportunities offered, and
supplementary actions will be performed by the Branch as well.
The agreement with the province of Chubut was ratified by provincial law No.
5616 passed by the Provincial Congress on May 24, 2007, enacted by decree No.
500/2007 and published in the Official Bulletin on May 28, 2007.
The agreement with the province of Santa Cruz was ratified by provincial law No.
3009 issued by the Provincial Congress on March 13, 2008, enacted by decree No.
545/2008 and published in the Official Bulletin on March 27, 2008.
NOTE 15 - SUBSEQUENT EVENTS
No events or transactions have occurred from period-end to the date of issuance
of these financial statements that would have a material effect on the financial
position of the Branch or the results of its operations as of that date.
EXHIBIT A
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
PROPERTY, PLANT AND EQUIPMENT (in pesos)
as of March 31, 2008 and December 31, 2007
Original values
----------------------------------------------------------------------------
At
beginning Increases for At
Main account of period the period Transfers Decreases period-end
--------------------------- --------------- ------------- -------------- ---------------- --------------
Land and buildings 63,181,291 - 131,708 - 63,312,999
Plants, wells and
exploration and
production facilities 14,032,607,241 47,050,217 157,457,319 217,376 14,236,897,401
Furniture and office
supplies 8,149,389 - - - 8,149,389
Equipment 155,628,892 - 4,154,375 - 159,783,267
Vehicles 48,081,219 - 589,608 - 48,670,827
Work in progress 804,921,605 568,202,237 (154,326,751)) - 1,218,797,091
Advances to suppliers 40,170,877 3,365,956 ( 8,006,259) - 35,530,574
--------------- ------------- -------------- ------------ --------------
Total as of 03/31/2008 15,152,740,514 618,618,410 - 217,376 15,771,141,548
=============== ============= ============== ============ ==============
Total as of 12/31/2007 12,909,726,416 2,398,016,058 - 155,001,960 15,152,740,514
=============== ============= ============== ============ ==============
Depreciation
--------------------------------------------------------
Accumulated Accumulated Net Net
at beginning at as of as of
Main account of period Increases Decreases period-end 03/31/08 12/31/07
--------------------------- -------------- ------------ ----------- ---------------- -------------- -------------
(1) (2)
Land and buildings 28,155,518 927,748 - 29,083,266 34,229,733 35,025,773
Plants, wells and
exploration and
production facilities 7,584,535,941 182,871,655 204,227 7,767,203,369 6,469,694,032 6,448,071,300
Furniture and office
supplies 7,981,530 18,796 - 8,000,326 149,063 167,859
Equipment 121,482,040 5,435,069 - 126,917,109 32,866,158 34,146,852
Vehicles 27,334,072 1,830,011 - 29,164,083 19,506,744 20,747,147
Work in progress - - - - 1,218,797,091 804,921,605
Advances to suppliers - - - - 35,530,574 40,170,877
-------------- ------------ ----------- ---------------- -------------- -------------
Total as of 03/31/2008 7,769,489,101 191,083,279 204,227 7,960,368,153 7,810,773,395
============== ============ =========== ================ ==============
Total as of 12/31/2007 7,039,238,260 769,123,691 38,872,850 7,769,489,101 7,383,251,413
============== ============ =========== ================ =============
(1) See Exhibit G.
(2) See depreciation policies in Note 3.2.e.
EXHIBIT B
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
INTANGIBLE ASSETS (in pesos)
as of March 31, 2008 and December 31, 2007
Original values Amortization
-----------------------------------------------------------------------------------------------------------------------
Increases Decreases Accumulated Decreases
At for for at for Accumulated Net Net
Main beginning the the At beginning For the the at as of as of
account of period period period period-end of period period period period-end 03/31/08 12/31/07
------------- ----------- --------- --------- ----------- ----------- --------- --------- ----------- -------- --------
(1) (2)
Pre-operating
expenses 48,740,915 - - 48,740,915 48,353,074 8,128 - 48,361,202 379,713 387,841
Acquisition
cost of
blocks 6,487,247 - - 6,487,247 6,484,619 2,628 - 6,487,247 - 2,628
Deferred
charges 63,488,027 - - 63,488,027 63,488,027 - - 63,488,027 - -
----------- --------- --------- ----------- ----------- --------- --------- ----------- -------- --------
Total as of
03/31/2008 118,716,189 - - 118,716,189 118,325,720 10,756 - 118,336,476 379,713
=========== ========= ========= =========== =========== ========= ========= =========== ========
Total as of
12/31/2007 118,716,189 - - 118,716,189 116,797,422 1,528,298 - 118,325,720
=========== ========= ========= =========== =========== ========= ========= ===========
390,469
========
(1) See Exhibit G.
(2) See amortization policies in Note 3.2.f.
EXHIBIT C
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
OTHER INVESTMENTS (in pesos)
Book Book
value value
Main account 03/31/2008 12/31/2007
Short-term investments
Mutual funds in foreign currency (Exhibit F) 1,171 1,138
Class: Citi Institutional Liquid Reserves
Quantity: 374 units
Quoted: US$ 1
(US dollar)
Government securities
"Certificados de cancelaci�n de deuda impositiva" (Certificates
evidencing payment of tax liability ,Government of the Province of Chubut)
Coupons Nos, 18, 19 and 20 2,058,680 1,500,411
Time deposits in foreign currency (Exhibit F) 7,389,986 218,595,022
Special deposit account in foreign currency (Exhibit F) 594,912,714 230,996,906
Total short-term investments 604,362,551 451,093,477
Long-term investments
Government securities:
Bonos de la Rep�blica Argentina - Discount bonds
in pesos 5.83% final maturity in 2033
Quantity: 4,821,350
Face value: $ 1
Quotation value: $ 1.0925 5,267,325 5,592,766
GDP coupon pesos
Quantity: 14,306,676
Face value: $ 1
Quotation value: $ 0,0994 1,422,083 1,258,987
"Certificados de cancelaci�n de deuda impositiva" (Certificates
evidencing payment of tax liability ,Government of the Province of Chubut)
Coupons Nos, 21m 22 and 23 2,058,680 2,680,093
Shares:
Garantizar S,A,
Quantity: 2000
Class: B
Face value: $ 1 2,000 2,000
Total long-term investments 8,750,088 9,533,846
Total investments 613,112,639 460,627,323
EXHIBIT D
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
ALLOWANCES, PROVISIONS AND ACCRUALS (in pesos)
as of March 31, 2008 and December 31, 2007
Balances at Decreases Balances as
beginning of Increases for for the of
Main account period the period period 03/31/08
----------------------------------- ---------------- ------------- ----------- -------------
Deducted from current assets:
Allowance for bad debtors in
foreign
currency 10,197,186 - - 10,197,186
Allowance for obsolescence of
materials 3,309,418 - - 3,309,418
---------------- ------------- ----------- -------------
Total deducted from assets 13,506,604 - - 13,506,604
================ ============= =========== =============
Included in current liabilities:
Provision for future compensation
to personnel 2,461,743 14,312 (1) - 2,476,055
---------------- ------------- ----------- -------------
Subtotal current liabilities 2,461,743 14,312 - 2,476,055
---------------- ------------- ----------- -------------
Included in non current
liabilities:
Accrual for lawsuits 20,217,498 1,059,042 (2) 310,395 (3) 20,966,145
Provision for environmental
remediation 82,182,464 1,691,480 (4) 1,223,896 (5) 82,650,048
Provision for future compensation
to personnel 15,241,426 1,246,407 (6) 591,098 (7) 15,896,735
---------------- ------------- ----------- -------------
Subtotal non current liabilities 117,641,388 3,996,929 2,125,389 119,512,928
---------------- ------------- =========== -------------
Total included in liabilities 120,103,131 4,011,241 2,125,389 121,988,983
================ ============= =========== =============
(1) Transfer from the non current provision for future compensation to
personnel.
(2) Charges for the period. It is made up of $ 767,075 included in production
costs (see Exhibit G) and $ $ 291,967 included in administrative expenses (see
Exhibit G) of the Statement of Income.
(3) Payments for the period.
(4) Charges for the period. It is made up of $ 1,442,695 included in financial
results provided by liabilities and $ 248,785 included in property, plant and
equipment.
(5) Uses for the period.
(6) Charges for the period. They are included in the financial results line of
the Statement of Income and in Exhibit G.
(7) It is made up of compensations paid during the period in the amount of $
576,786 and the transfer referred to in line 1 in the amount of $ 14,312.
EXHIBIT E
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
COST OF SALES (in pesos)
for the three-month period beginning January 1, 2008 and ended March 31, 2008,
comparative with the same period of the prior year
2008 2007
------------------- ------------------
(3 months) (3 months)
Inventories at the beginning of year 172,961,162 117,701,356
Purchases 39,302,730 47,481,091
Production costs (Exhibit G) 722,019,720 563,330,412
Inventories at period-end (231,405,054) ( 53,011,005)
------------------- ------------------
Cost of sales 702,878,558 675,501,854
=================== ==================
EXHIBIT F
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
ASSETS AND LIABILITIES IN FOREIGN CURRENCY
as of March 31, 2008 and December 31, 2007
Amount in Amount in
Type and amount Exchange Argentine Type and amount Argentine
of currency as of foreign currency
foreign currency of currency as of
Item as of rate as of 12/31/2007
03/31/2008 03/31/2008 12/31/2007
------------------------ ----------------- -------- ------------- ----------------- -----------
US$ Euros $ (1) (1) US$ Euros (2) (2)
ASSETS
CURRENT ASSETS
Cash on hand and in
banks
Cash on hand - 4,370 4.9454 21,611 - - 4,370 19,981
13,738 - 3.128 42,972 64,583 53,298 165,702 185,683
----------- -----------
Cash in banks
Domestic 26,123 - 3.128 81,714 25,275 78,581
Foreign 437,330 - 3.128 1,367,968 1,449,682 32,246 100,253 178,834
----------- -----------
Investments
Time deposits in
foreign currency 2,362,527 - 3.128 7,389,986 70,310,396 218,595,022
Mutual funds in
foreign currency 374 - 3.128 1,171 366 1,138
Special deposit
account in foreign
currency 190,189,487 - 3.128 594,912,714 74,299,423 230,996,906
Accounts receivable
Domestic 149,374,052 - 3.128 467,242,035 116,860,806 363,320,247
Foreign 102,066,669 - 3.128 319,264,541 786,506,576 7,697,427 23,931,302 387,251,549
----------- -----------
Foreign related
companies 855,982 - 3.128 2,677,513 - -
Other receivables
Expenses
recoverable -
foreign 940,605 - 3.128 2,942,212 618,626 1,923,308
Miscellaneous -
domestic 434,732 - 3.128 1,359,842 - 435,222 1,353,106
Miscellaneous -
foreign 1,598,475 - 3.128 5,000,030 6,359,872 2,612,750 8,123,039 9,476,145
----------- -----------
Foreign affiliated
companies 3,130,160 - 3.128 9,791,140 735,516 2,286,719
Inventories
Advances to suppliers
-
foreign 184,212 - 3.128 576,215 184,212 - 572,715
----------- ----- ------------- ----------- ----- -----------
Total current
assets 451,614,466 4,370 1,412,671,664 273,865,563 4,370 851,468,019
----------- ----- ------------- ----------- ----- -----------
NON CURRENT ASSETS
Other receivables
Miscellaneous -
domestic 4,510,397 - 3.128 14,108,521 4,601,062 - 14,304,701
----------- ----- ------------- ----------- ----- -----------
Total non current
assets 4,510,397 - 14,108,521 4,601,062 - 14,304,701
----------- ----- ------------- ----------- ----- -----------
Total assets 456,124,863 4,370 1,426,780,185 278,466,625 4,370 865,772,720
=========== ===== ============= =========== ===== ===========
US$ = US dollar
(1) As per buyer exchange rate as of March 31, 2008.
(2) As per buyer exchange rate as of December 31, 2007.
EXHIBIT F
(Cont.)
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
ASSETS AND LIABILITIES IN FOREIGN CURRENCY
as of March 31, 2008 and December 31, 2007
Amount in Amount in
Type and amount Exchange Argentine Type and Argentine
of currency as amount of currency as
foreign currency of foreign of
currency
Item as of rate as of
03/31/2008 03/31/2008 12/31/2007 12/31/2007
---------------------- ----------------- -------- ------------- ------------- -------------
US$ $ (1) (1) US$ (2) (2)
LIABILITIES
CURRENT LIABILITIES
Accounts payable
Trade - domestic 43,328,402 3.168 137,264,378 48,454,730 152,583,946
Trade - foreign 2,154,278 3.168 6,824,752 144,089,130 2,260,353 7,117,852 159,701,798
------------- -------------
Affiliated companies
- domestic 661,390 3.168 2,095,284 1,039,475 3,273,306
Affiliated companies
- foreign 680,164 3.168 2,154,760 4,250,044 606,618 1,910,240 5,183,546
------------- -------------
Loans
Unsecured notes
payable - domestic 150,000,000 3.168 475,200,000 82,000,000 258,218,000
Unsecured notes
payable - foreign 46,072,605 3.168 145,958,012 621,158,012 46,818,827 147,432,487 405,650,487
------------- -------------
Interest accrued on
bonds and notes
payable 24,843,586 3.168 78,704,481 24,081,660 75,833,146
----------------- ------------- ------------- -------------
-------------
Total current
liabilities 267,740,425 848,201,667 205,261,663 646,368,977
----------------- ------------- ------------- -------------
NON CURRENT
LIABILITIES
Accounts payable
Miscellaneous
liabilities -
foreign 5,510,148 3.168 17,456,148 5,510,148 17,351,455
Loans
Bonds - foreign 350,000,000 3.168 1,108,800,000 350,000,000 1,102,150,000
Unsecured notes
payable - domestic - - - - 15,000,000 47,235,000 -
Unsecured notes
payable - foreign 715,975,000 3.168 2,268,208,800 2,268,208,800 582,780,000 1,835,174,219 1,882,409,219
----------------- ------------- ------------- ------------- ------------- -------------
Total non current
liabilities 1,071,485,148 3,394,464,948 953,290,148 3,001,910,674
----------------- ------------- ------------- -------------
Total liabilities 1,339,225,573 4,242,666,615 1,158,551,811 3,648,279,651
================= ============= ============= =============
US$ = US dollar
(1) As per seller exchange rate as of March 31, 2008.
(2) As per seller exchange rate as of December 31, 2007.
EXHIBIT G
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
INFORMATION REQUIRED BY ART. 64, CLAUSE 1b) OF LAW 19550, for the three-month
period beginning January 1, 2008 and ended March 31, 2008, comparative with the
same period of the prior year (in pesos)
Production Administrative
Items costs expenses Total 2008 Total 2007
---------------------------------------- ------------- ---------------- --------------- --------------
(3 months) (3 months)
Fees and compensation for services 4,732,804 4,806,775 9,539,579 8,379,347
Salaries, wages and benefits to
personnel 49,976,210 9,061,825 59,038,035 40,500,441
Defined benefit plans to personnel
(Note 3.2.j) 1,573,834 780,470 2,354,304 1,543,319
Social security contributions 6,403,249 1,581,604 7,984,853 5,136,341
Taxes, assessments and other
contributions 303,065,665 36,673,784 339,739,449 203,191,019
Depreciation of property, plant and
equipment
(Exhibit A) 188,682,502 2,400,777 191,083,279 200,991,260
Intangible asset amortization (Exhibit
B) 10,756 - 10,756 405,814
Transportation, freight and storage
expenses 30,262,570 14,605 30,277,175 35,691,377
Contracted services 112,675,165 2,943,784 115,618,949 91,333,362
Travel and accommodation expenses 2,573,453 1,885,645 4,459,098 2,849,545
Building rentals and maintenance 8,675,021 4,359,346 13,034,367 7,240,248
Environmental remediation and rights of
way 10,032,068 - 10,032,068 5,392,182
Lawsuits (Exhibit D) 767,075 291,967 1,059,042 712,402
Production, exploration and
administrative
general expenses 2,589,348 55,460 2,644,808 15,966,665
------------- ---------------- --------------- --------------
Total 2008 (3 months) 722,019,720 64,856,042 786,875,762
============= ================ ===============
Total 2007 (3 months) 563,330,412 56,002,910 619,333,322
============= ================ ==============
EXHIBIT H
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
Balance sheet as of March 31, 2008 and December 31, 2007
TERMS, INTEREST RATES AND ADJUSTMENT CLAUSES OF SHORT-TERM INVESTMENTS, LOANS,
RECEIVABLES AND PAYABLES (in pesos)
Investments Receivables
---------------------------- ------------------------------
03/31/2008 12/31/2007 03/31/2008 12/31/2007
------------- -------------- -------------- ---------------
Total amount
without any
established
term 1,424,083 (1) 1,260,987 97,964,706 (3) 101,806,117
To become
due:
Up to 3
months 602,990,097 450,344,176 924,512,880 515,078,238
From 3 to 6
months 686,227 - 1,891,465 1,718,540
From 6 to 9
months - 670,023 1,785,205 1,674,756
From 9 to 12
months 686,227 79,278 2,202,716 1,610,016
From 1 to 2
years 1,372,453 1,340,047 5,909,985 5,651,924
From 2 to 3
years 686,227 1,340,046 4,308,811 3,793,343
From 3 to 4
years - - 1,664,563 1,574,957
From 4 to 5
years - - 956,972 848,516
From 5 to 6
years - - 413,073 382,649
From 6 to 7
years - - - -
From 7 to 8
years - - - -
From 8 to 9
years - - - -
From 9 to 10
years - - - -
From 10 to
11 years - - - -
Over 11
years 5,267,325 (2) 5,592,766 (2) - -
------------- -------------- -------------- ---------------
Subtotal 613,112,639 460,627,323 1,041,610,376 634,139,056
Other items
that are
not to be
collected
or paid in
cash - - 20,103,373 15,541,887
------------- -------------- -------------- ---------------
Total 613,112,639 460,627,323 1,061,713,749 649,680,943
============= ============== ============== ===============
Payables Loans
---------------------------- ---------------------------
03/31/2008 12/31/2007 03/31/2008 12/31/2007
------------- -------------- ------------- -------------
Total amount
without any
established
term 677,475,555 664,952,181 - -
To become
due:
Up to 3
months 1,021,368,550 754,732,049 578,197,480 566,991,809
From 3 to 6
months 619,014 174,757,551 229,854,240 123,035,173
From 6 to 9
months 619,014 615,436 - 55,280,695
From 9 to 12
months 24,583,514 30,986,936 100,758,240 -
From 1 to 2
years 232,457 229,339 682,418,880 655,218,728
From 2 to 3
years - - 761,618,880 293,083,728
From 3 to 4
years - - 761,618,880 686,708,728
From 4 to 5
years - - 329,978,880 686,708,728
From 5 to 6
years - - 294,338,880 222,237,526
From 6 to 7
years - - 248,402,880 189,236,006
From 7 to 8
years - - 126,292,320 113,722,986
From 8 to 9
years - - 97,574,400 83,398,116
From 9 to 10
years - - 50,054,400 36,163,116
From 10 to
11 years - - 24,710,400 18,081,557
Over 11
years - - - -
------------- -------------- ------------- -------------
Subtotal 1,724,898,104 1,626,273,492 4,285,818,760 3,729,866,896
Other items
that are
not to be
collected
or paid in
cash - - - -
------------- -------------- ------------- -------------
Total 1,724,898,104 1,626,273,492 4,285,818,760 3,729,866,896
============= ============== ============= =============
(1) It includes $ 1,422,083 relating to GDP coupons in pesos. The government
securities linked to the GDP become due on 12/31/2035. However, in the event a
certain GDP rate growth is exceeded in the country, the bondholders shall be
entitled to annual payments.
(2) It is amortized as from 06/30/2024 in 20 semiannual installments (on 06/30
and 12/31 of each year), the final maturity of which is on 12/31/2033.
(3) It includes the overdue receivables detailed in item 3.a of the
supplementary information.
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH) EXHIBIT H
(Cont.)
Balance sheet as of March 31, 2008 and December 31, 2007
TERMS, INTEREST RATES AND ADJUSTMENT CLAUSES OF SHORT-TERM INVESTMENTS, LOANS,
RECEIVABLES AND PAYABLES (in pesos)
Investments Receivables
--------------------------------- -----------------------------------
03/31/2008 12/31/2007 03/31/2008 12/31/2007
---------------- ---------------- ------------------ ----------------
Rate Pesos Rate Pesos Rate Pesos Rate Pesos
---- ----------- ---- ----------- ---- ------------- ---- -----------
Annual
fixed
rate in
US$ - - - - - - - -
Annual
fixed
rate in
US$ - - - - - - - -
Annual
fixed
rate in
US$ - - - - - - - -
Annual
fixed
rate in
US$ - - - - - - - -
Annual
fixed
rate in
US$ - - - - - - - -
Annual
fixed
rate in
US$ - - - - - - - -
Annual
fixed
rate in
US$ - - - - - - - -
Annual
fixed
rate in
US$ - - - - - - - -
CER plus
annual
fixed
rate in
$ 4.00 4,117,360 4.00 4,180,504 - - - -
Average
annual
variable
rate in
$ - - - - 8.00 16,681,692 8.00 15,196,646
Annual
fixed
rate in
US$ - - - - 8.50 1,551,550 8.50 1,654,064
Average
annual
variable
rate in
US$ - - - - - - - -
Average
annual
fixed
rate in
US$ - - - - - - - -
Average
annual
variable
rate in
US$ 2.49 602,303,871 4.62 449,593,066 4.50 7,144 4.50 14,286
Annual
fixed
rate in
$ plus
CER 5.83 5,267,325 5.83 5,592,766 - - -
Non-
interest
bearing 1,424,083 1,260,987 - 1,043,473,363 632,815,947
----------- ----------- ------------- -----------
Total 613,112,639 460,627,323 1,061,713,749 649,680,943
=========== =========== ============= ===========
Payables Loans
------------------------------------- -----------------------------------------------------
03/31/2008 12/31/2007 03/31/2008 12/31/2007
------------------ ------------------ -------------------------- --------------------------
Rate Pesos Rate Pesos Rate Pesos Rate Pesos
---- ------------- ---- ------------- -------- ----------------- -------- -----------------
Annual
fixed
rate in
US$ - - - - 7.125 316,800,000 7.125 314,900,000
Annual
fixed
rate in
US$ - - - - 5.45 1,899,121 5.45 1,887,731
Annual
fixed
rate in
US$ - - - - 6.18 64,586 6.18 64,199
Annual
fixed
rate in
US$ - - - - 7.56 264,005,280 7.56 279,914,610
Annual
fixed
rate in
US$ - - - - 6.97 320,760,000 6.97 354,262,500
Annual
fixed
rate in
US$ - - - - 5.66 (2) 47,520,000 5.66 (2) 47,235,000
Annual
fixed
rate in
US$ - - - - 8.00 31,680,000 8.00 31,490,000
Annual
fixed
rate in
US$ - - - - 7.75 792,000,000 7.75 787,250,000
CER plus
annual
fixed
rate in
$ - - - - - - - -
Average
annual
variable
rate in
$ - - - - 7.92 208,947,464 9.83 263,824,044
Annual
fixed
rate in
US$ - - - - - * - -
Average
annual
variable
rate in
US$ - - - - 6.71 1,764,077,828 7.14 1,267,752,666
Average
annual
fixed
rate in
US$ - - - - 5.53 459,360,000 5.76 305,453,000
Average
annual
variable
rate in
US$ - - - - - - -
Annual
fixed
rate in
$ plus
CER - - - - - - -
Non-
interest
bearing 1,724,898,104 1,626,273,492 - -
------------- ------------- ----------------- -----------------
Total 1,724,898,104 1,626,273,492 4,207,114,279 (1) 3,654,033,750 (1)
============= ============= ================= =================
(1) It only includes principal at face value.
(2) Plus additional interest calculated in relation to the economic performance
of Pan American Energy LLC.
EXHIBIT I
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
Balance sheet as of March 31, 2008 and December 31, 2007
PARTICIPATION IN JOINT VENTURES (in pesos)
Lindero Lindero Aguada Aguada San San Estancia
La
Atravesado Atravesado Pichana Pichana Roque Roque Acambuco Acambuco Escondida
62.50% 62.50% 18.18% 18.18% 16.47 % 16.47 % 52.00 % 52.00 % 25.00%
Balance sheet 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008
------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
ASSETS
-------------
CURRENT
ASSETS
-------------
Cash on hand
and in banks 3,118,707 6,737 173,235 162,872 176,500 21,005 7,548,315 115,536 108,816
Other
receivables 1,541,136 1,022,484 11,454,674 9,917,410 5,119,016 5,035,286 495,623 611,434 639,188
Inventories 7,977,370 6,518,514 9,732,471 9,565,286 8,087,882 9,049,887 2,822,346 2,697,006 73,848
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total current
assets 12,637,213 7,547,735 21,360,380 19,645,568 13,383,398 14,106,178 10,866,284 3,423,976 821,852
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
NON CURRENT
ASSETS
-------------
Property,
plant and
equipment 135,323,039 132,339,618 254,155,748 253,948,755 194,008,689 189,303,216 690,201,917 673,640,204 5,796,078
Intangible
assets - - - - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total non
current
assets 135,323,039 132,339,618 254,155,748 253,948,755 194,008,689 189,303,216 690,201,917 673,640,204 5,796,078
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total assets 147,960,252 139,887,353 275,516,128 273,594,323 207,392,087 203,409,394 701,068,201 677,064,180 6,617,930
=========== =========== =========== =========== =========== =========== =========== =========== ==========
Costa Costa Costa Costa
Afuera Afuera Afuera Afuera
Estancia Argentina Argentina Argentina Argentina Anticlinal Anticlinal
La
Escondida Bandurria Bandurria Bloque 40 Bloque 40 Bloque 46 Bloque 46 Funes Funes
25.00% 18.18% 18.18% 50.00% 50.00% 50.00% 50.00% 80.00% 80.00%
Balance sheet 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007
-------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ASSETS
--------------------
CURRENT ASSETS
--------------------
Cash on hand and in
banks 28,033 70,932 68,531 - - - - - -
Other receivables 1,171,815 8,948 8,948 63,424 63,424 29,265 29,265 984,428 911,323
Inventories 80,115 - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total current assets 1,279,963 79,880 77,479 63,424 63,424 29,265 29,265 984,428 911,323
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NON CURRENT ASSETS
--------------------
Property, plant and
equipment 5,587,925 2,117,425 2,117,425 13,835,541 13,835,541 1,113,741 1,113,741 3,404,654 3,820,656
Intangible assets 2,628 - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total non current
assets 5,590,553 2,117,425 2,117,425 13,835,541 13,835,541 1,113,741 1,113,741 3,404,654 3,820,656
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 6,870,516 2,197,305 2,194,904 13,898,965 13,898,965 1,143,006 1,143,006 4,389,082 4,731,979
========== ========== ========== ========== ========== ========== ========== ========== ==========
EXHIBIT I
(Cont.)
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
Balance sheet as of March 31, 2008 and December 31, 2007
PARTICIPATION IN JOINT VENTURES (in pesos)
Lindero Lindero Aguada Aguada San San Estancia
La
Atravesado Atravesado Pichana Pichana Roque Roque Acambuco Acambuco Escondida
62.50% 62.50% 18.18% 18.18% 16.47% 16.47% 52.00% 52.00% 25.00%
Balance
sheet 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008
------------ ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
LIABILITIES
------------
CURRENT
LIABILITIES
------------
Accounts
payable 3,747,969 42,329,714 44,692,923 18,733,880 14,300,600 25,615,451 31,815,503 515,148
Payroll and
social
security
contributions 754,526 - - - - 388,601 659,944 -
Taxes payable 123,464 22,379 215 23,150 - 789,351 275,367 117,869
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total current
liabilities 4,625,959 42,352,093 44,693,138 18,757,030 14,300,600 26,793,403 32,750,814 633,017
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
NON CURRENT
LIABILITIES
--------------
Accounts
payable 3,261,912 219,132 219,132 876,528 876,528 1,826,656 1,741,273 -
Provision for
environmental
remediation 10,608,086 6,532,250 6,401,074 9,055,980 8,873,866 3,530,638 3,459,737 85,351
Accruals 6,147,461 75,636 76,201 363,252 436,293 2,552,318 2,458,378 -
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total non
current
liabilities 20,017,459 6,827,018 6,696,407 10,295,760 10,186,687 7,909,612 7,659,388 85,351
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total
liabilities 24,643,418 49,179,111 51,389,545 29,052,790 24,487,287 34,703,015 40,410,202 718,368
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Owner's equity 115,243,935 226,337,017 222,204,778 178,339,297 178,922,107 666,365,186 636,653,978 5,899,562
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total 139,887,353 275,516,128 273,594,323 207,392,087 203,409,394 701,068,201 677,064,180 6,617,930
=========== =========== =========== =========== =========== =========== =========== ==========
Costa Costa Costa Costa
Afuera Afuera Afuera Afuera
Estancia Argentina Argentina Argentina Argentina Anticlinal Anticlinal
La
Escondida Bandurria Bandurria Bloque 40 Bloque 40 Bloque 46 Bloque 46 Funes Funes
25.00% 18.18% 18.18% 50.00% 50.00% 50.00% 50.00% 80.00% 80.00%
Balance
sheet 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007 03/31/2008 12/31/2007
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES
------------
CURRENT
LIABILITIES
------------
Accounts
payable 1,201,226 590,492 509,626 - - - - 1,911,993 1,078,756
Payroll and
social
security
contributions - - - - - - - 6,953 6,711
Taxes payable 111,921 8,499 6,793 - - - - 9,452 2,654
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total current
liabilities 1,313,147 598,991 516,419 - - - - 1,928,398 1,088,121
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
NON CURRENT
LIABILITIES
--------------
Accounts
payable - - - -
Provision for
environmental
remediation 83,641 - - - - - - 562,768 551,850
Accruals - - - - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total non
current
liabilities 83,641 - - - - - - 562,768 551,850
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total
liabilities 1,396,788 598,991 516,419 - - - - 2,491,166 1,639,971
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Owner's equity5,473,728 1,598,314 1,678,485 13,898,965 13,898,965 1,143,006 1,143,006 1,897,916 3,092,008
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total 6,870,516 2,197,305 2,194,904 13,898,965 13,898,965 1,143,006 1,143,006 4,389,082 4,731,979
========== ========== ========== ========== ========== ========== ========== ========== ==========
EXHIBIT I
(Cont.)
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
Statement of income for the three-month period beginning January 1 and ended
March 31, 2008, comparative with the same period of the prior year
PARTICIPATION IN JOINT VENTURES (in pesos)
Lindero Lindero Aguada Aguada San San
Atravesado Atravesado Pichana Pichana Roque Roque Acambuco Acambuco
62.50% 62.50% 18.18% 18.18% 16.47% 16.47% 52.00% 52.00%
2008 2007 2008 2007 2008 2007 2008 2007
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
(3 months) (3 months) (3 months) (3 months) (3 months) (3 months) (3 months) (3 months)
STATEMENT OF INCOME
----------------------------
Sales (1) - - - - - - - -
Cost of
sales (14,878,876) (11,129,174) (41,814,557) (28,292,548) (23,324,306) (12,797,274) (43,871,195) (33,286,758)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross result (14,878,876) (11,129,174) (41,814,557) (28,292,548) (23,324,306) (12,797,274) (43,871,195) (33,286,758)
Adminis-
trative expenses - - - - - - - -
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating result(14,878,876) (11,129,174) (41,814,557) (28,292,548) (23,324,306) (12,797,274) (43,871,195) (33,286,758)
Financial
results
- net ( 123,722) ( 120,487) ( 92,004) ( 54,238) ( 127,731) ( 103,617) ( 14,335) ( 18,756)
Other income
and
expenses -
net ( 204,856) 446,567 43,895 18,883 30,038 18,521 210,280 297,088
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net results (15,207,454) (10,803,094) (41,862,666) (28,327,903) (23,421,999) (12,882,370) (43,675,250) (33,008,426)
============ ============ ============ ============ ============ ============ ============ ============
Costa Costa Costa Costa
Afuera Afuera Afuera Afuera
Estancia Estancia Argentina Argentina Argentina Argentina Anticlinal Anticlinal
La La
Escondida Escondida Bandurria Bandurria Bloque 40 Bloque 46 Bloque 46 Bloque 46 Funes Funes
25.00% 25.00% 18.18% 18.18%% 50.00% 35.00% 50.00% 35.00% 80.00% 80.00%
2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
----------- ---------- --------- ----------- --------- --------- --------- --------- ----------- -----------
(3 months) (3 months) (3 (3 months) (3 (3 (3 (3 (3 months) (3 months)
months) months) months) months) months)
STATEMENT OF INCOME
----------------------
Sales (1) - - - - - - - - - -
Cost of
sales (951,900) (780,449) - - - - - - (3,243,947) (2,551,936)
----------- ---------- --------- ----------- --------- --------- --------- --------- ----------- -----------
Gross result (951,900) (780,449) - - - - - - (3,243,947) (2,551,936)
Adminis-
trative
expenses - - - - - - - - - -
----------- ---------- --------- ----------- --------- --------- --------- --------- ----------- -----------
Operating
result (951,900) (780,449) - - - - - - (3,243,947) (2,551,936)
Financial
results
- net ( 478) ( 988) 566 ( 1,205) - - - - ( 42,487) ( 6,456)
Other income
and
expenses -
net - - (296,979) (2,646,587) (281,362) 852,941 (239,478) 239,893 - -
----------- ---------- --------- ----------- --------- --------- --------- --------- ----------- -----------
Net results (952,378) (781,437) (296,413) (2,647,792) (281,362) 852,941 (239,478) 239,893 (3,286,434) (2,558,392)
=========== ========== ========= =========== ========= ========= ========= ========= =========== ===========
(1) No sales were recorded in the joint ventures because production is directly
assigned to each participant.
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
FINANCIAL STATEMENTS as of March 31, 2008
REPORTING SUMMARY REQUIRED BY RESOLUTION No. 290/97 OF THE NATIONAL SECURITIES
COMMISSION
1. Comment on the Branch's activity
1.1. Operating activities
Pan American Energy LLC (Argentine Branch) is mainly engaged in the exploration,
development and production of hydrocarbons. The Head Office of the Branch is Pan
American Energy LLC, which also has various subsidiaries and affiliates that
carry out activities in Argentina and other Mercosur countries. BP and Bridas
Corporation hold interests that account for 60% and 40%, respectively of the
Branch's ownership.
During the first quarter of 2008, with a daily average production of 225.3
thousand barrels of oil, the Branch together with subsidiaries of Head Office
that develop their activities in the country rank second in the production of
natural gas and oil in Argentina.
1.2. Issuance of bonds
On February 11, 1997, Amoco Argentina Oil Company (Argentine Branch) issued the
Second Series of bonds in the amount of US$ 100,000,000 due in ten years at a
rate of 6.75%. The bonds were paid upon maturity on February 1, 2007. Such
issuance was made under a short and medium term bond program in the amount of
US$ 200,000,000, authorized by Resolution No. 10982 issued by the CNV on July
13, 1995.
As a result of the transfer of assets and liabilities referred to in the second
paragraph of note 1 to these financial statements, Amoco Argentina Oil Company
(Argentine Branch) transferred the above mentioned bonds to Pan American Energy
LLC (Argentine Branch). Such bonds were guaranteed by BP Company North America
Inc. until repayment in February 2007.
On February 21, 2002, through Resolution No. 14123, the CNV authorized the
Global Program for the Issuance of Bonds of Pan American Energy LLC (Argentine
Branch) (the "Global Program") in the total amount of US$ 1,000,000,000.
On October 27, 2004, the Branch issued Bonds Class 3 in the amount of
US$ 100,000,000 under the Global Program. The bonds become due in five years
(October 27, 2009) with a 7.125% annual fixed interest rate to be paid on a
half-yearly basis. The price of the issuance was 99.483% of the nominal value.
The funds derived from this issuance were allocated to investments in property,
plant and equipment and repayment of loans.
On August 9, 2006, the Branch issued Bonds Class 4 in the amount of
US$ 250,000,000 under the Global Program, to be repaid in two equal installments
becoming due on February 9, 2011 and February 9, 2012, with interest accruing at
an annual fixed interest rate of 7.75% to be paid on a half-yearly basis. The
price of the issuance was 100.00% of the nominal value. The funds obtained from
this issue were allocated to investments in property, plant and equipment and
repayment of loans.
Bonds Class 3 and Class 4 are guaranteed by Pan American Energy LLC.
1.3. Loan agreements
On July 11, 2005, the Branch obtained from the International Finance Corporation
(IFC) a loan in the amount of US$ 250,000,000 guaranteed by Pan American Energy
LLC and consisting of three tranches:
- "A" in the amount of US$ 100,000,000 with interest accruing at an annual fixed
rate of 7.56%, through an interest rate swap with IFC, amortizable on a
six-month installments basis, and becoming due in July 2015,
- "B" in the amount of US$ 135,000,000, at an annual fixed rate of 6.97%,
through an interest rate swap with IFC, amortizable on a six-month installments
basis, and becoming due in July 2012, and
- "C" in the amount of US$ 15,000,000, at an annual fixed base rate of 5.66%
plus additional interest calculated in relation to Pan American Energy LLC�s
economic performance, becoming due in July 2016.
The first repayment of principal for tranches "A" and "B" was made on January
15, 2007.
The funds obtained were used to partially fund the 2005 investment program in
San Jorge Gulf.
On July 13, 2007, the Branch obtained from the International Finance Corporation
(IFC) a loan in the amount of US$ 550,000,000, consisting of two tranches which
accrue interest at a variable rate:
- "A" in the amount of US$ 150,000,000, amortizable on a six-month installments
basis and becoming due in April 2018; and
- "B" Sub-tranch "1" in the amount of US$ 158,500,000, amortizable on a
six-month installments basis and becoming due in April 2014, and "B-2" in the
amount of US$ 241,500,000, amortizable on a six-month installments basis and
becoming due in April 2015.
The loan is guaranteed by Pan American Energy LLC and the funds obtained are
being applied to partially fund the investment program that the Company will
undertake in the Cerro Drag�n area, in the San Jorge Gulf basin, located in the
provinces of Santa Cruz and Chubut.
As of December 31, 2007, the amount of US$ 400,000,000 of such loan had been
disbursed and in January 2008, the remaining amount of US$ 150,000,000 was
disbursed.
2. Balance sheet items as of March 31, 2008(in pesos)
Balance Balance Balance
Balance Balance
sheet sheet sheet
sheet sheet
as of as of as of
as of as of
03/31/2008 03/31/2007 03/31/2006
03/31/2005 03/31/2004
Current assets 1,878,053,939 1,492,662,570 1,326,318,306 742,909,657 382,351,028
Non current assets 7,873,222,768 6,169,807,720 5,076,854,853 4,391,455,874 4,019,654,314
--------------- --------------- --------------- --------------- ---------------
Total 9,751,276,707 7,662,470,290 6,403,173,159 5,134,365,531 4,402,005,342
=============== =============== =============== =============== ===============
Current liabilities 1,956,000,052 2,647,403,167 1,803,904,364 1,414,276,014 1,222,640,937
Non current
liabilities 4,075,682,957 2,559,598,063 1,839,876,359 1,317,731,414 1,523,204,123
--------------- --------------- --------------- --------------- ---------------
Subtotal 6,031,683,009 5,207,001,230 3,643,780,723 2,732,007,428 2,745,845,060
Account with Head
Office 3,258,354,691 1,994,230,053 2,298,153,429 1,941,119,096 1,216,700,282
Capital allocated to
the Branch 221,779,007 221,779,007 221,779,007 221,779,007 200,000,000
Capital adjustment 39,460,000 239,460,000 239,460,000 239,460,000 239,460,000
--------------- --------------- --------------- --------------- ---------------
Total 9,751,276,707 7,662,470,290 6,403,173,159 5,134,365,531 4,402,005,342
=============== =============== =============== =============== ===============
3. Income statement items as of March 31, 2008 (in pesos)
Three-month Three-month Three-month
Three-month Three-month
period ended period ended period ended
period ended period ended
03/31/2008 03/31/2007 03/31/2006
03/31/2005 03/31/2004
Ordinary operating income 701,141,054 626,183,792 791,067,389 414,146,484 304,287,339
Financial results ( 92,817,301) ( 78,310,627) ( 32,504,397) 10,980,813 48,701,182
Other income and expenses -
net ( 2,065,569) ( 1,977,433) ( 60,087,391) ( 5,393,877) ( 5,397,090)
-------------- -------------- ------------- -------------- -------------
Income before taxes 606,258,184 545,895,732 698,475,601 419,733,420 347,591,431
Income tax current (212,349,112) (204,821,539) (258,498,724) (141,343,582) (111,520,511)
Deferred tax ( 5,177,255) 18,218,711 9,903,722 ( 6,435,344) ( 19,319,285)
-------------- -------------- ------------- -------------- -------------
Net income 388,731,817 359,292,904 449,880,599 271,954,494 216,751,635
============== ============== ============= ============== =============
4. Statistical data
Three-month Three-month Three-month Three-month Three-month
period ended period ended period ended period ended period ended
03/31/2008 03/31/2007 03/31/2006 03/31/2005 03/31/2004
-------------- -------------- -------------- -------------- --------------
In cubic In cubic In cubic In cubic In cubic
meters meters meters meters meters
-------------- ------------- -------------- -------------- --------------
Production of crude
oil 1,542,244 1,520,676 1,463,758 1,437,511 1,374,910
Sale of crude oil 1,446,579 1,608,722 1,664,392 1,576,430 1,343,936
In thousand In thousand In thousand In thousand In thousand
cubic meters cubic meters cubic meters cubic meters cubic meters
-------------- ------------- -------------- -------------- --------------
Production of natural
gas 1,383,936 1,202,589 1,143,951 993,695 975,991
Sale of natural gas 1,406,037 1,256,209 1,113,939 1,015,515 883,738
Transportation of
natural gas - 2,756 78,530 95,843 77,088
In tons In tons In tons In tons In tons
-------------- ------------- -------------- -------------- --------------
Production of L.P.G. 24,707 20,613 21,969 13,410 13,603
Sale of L.P.G. 24,179 31,629 30,010 27 18,780
5. Indexes
Financial Financial Financial Financial Financial
statements as statements as statements as statements as statements as
of of of of of
03/31/2008 03/31/2007 03/31/2006 03/31/2005 03/31/2004
-------------- -------------- -------------- -------------- --------------
Liquidity 0.96 0.56 0.74 0.53 0.31
Indebtedness 1.62 2.12 1.32 1.14 1.66
Tied -up funds 0.81 0.81 0.79 0.86 0.91
Solvency 0.62 0.47 0.76 0.88 0.60
6. Business prospects
Pan American Energy LLC (Argentine Branch) is working to maintain and increase
its operating efficiency in connection with the oil and gas exploration and
production, to continue increasing its share in hydrocarbon production in
Argentina, satisfying in this way the needs derived from a sustained growth rate
of the country's economy as well as to comply with its existing contractual
obligations. The Branch strives to provide its personnel and contractors with
healthy and safe working conditions while preserving the environment.
The Branch is strongly engaged with the concerns and challenges posed by the
communities where it operates, by developing different social responsibility
programs (CSR).
During the first quarter of 2008, the Branch's oil production grew by 1.4% and
natural gas production rose by 15.0% with respect to the same period of the
prior fiscal year. This growth results from the active investment program
successfully implemented by Pan American Energy in the last years, which has
allowed it to double hydrocarbon production from 1999 to 2006.
After the 2002 crisis, the country has managed to achieve high gross domestic
product (GDP) growth with relatively low inflation rates though growing recently
and, a stable currency, with unemployment rates that have been significantly
reduced.
In the first quarter of 2008, the GDP grew by 8.7% compared with the same period
of the prior fiscal year, which indicates that a growing trend - initiated 24
quarters ago - continues. It is estimated that the gross domestic product will
increase by 6.9% in 2008. The unemployment rate is about 7.5%.
In the first quarter of 2008, the fiscal surplus totaled 8,844 million pesos,
thus disclosing a 73.9% increase compared to the same period of the prior fiscal
year. The level of foreign indebtedness as of December 31, 2007 increased with
respect to the same date of the prior fiscal year and amounted to US$ 144,729
million. The country's international reserves amounted US$ 50,464 million as of
March 31, 2008, 36.9% higher than those for the prior fiscal year.
The increase in the oil industry costs is a source of concern, since it clearly
exceeds the general increase in prices.
As previously informed, revenues from the exploration and production of oil and
gas were affected by the amendments to the regulations in force. In the case of
oil, as from March 2002, an increasing rate of export tariffs on exports has
been applied, which has also affected the sales prices in the domestic market.
On November 15, 2007, the Ministry of Economy and Production of Argentina issued
Resolution 394/07 by which export tariffs on oil and by products exports were
significantly increased for sales of oil above US$ 60.9 / barrel. The results of
the first quarter reflect the impact of this increase.
In the case of natural gas, in January 2002, the wellhead price of natural gas
was redenominated into pesos and frozen and, afterwards, export tariffs on
exports and quantitative restrictions to them were established. In April 2004,
the Secretary of Energy and the natural gas producers signed an agreement named
"regularization of wellhead prices". This agreement had a term that had expired
on December 31, 2006, after which, and at the request of the related
authorities, a new agreement was signed that will be in force until December 31,
2011.
The new agreement, approved last June by Resolution 599/07 of the Secretary of
Energy, compels producers (including the Branch) to satisfy the domestic demand
up to the levels reached in 2006 plus the growth of the residential market
during the validity thereof by setting out new guidelines for price changes.
In relation to export tariffs on gas exports, on July 25, 2006, the Ministry of
Economy and Production of Argentina, through Resolution No. 534/2006, increased
them to 45% of the price established under the form contract entered into
between Argentina and Bolivia (for the first quarter of 2008, export tariffs
amounted to US$ 3.14 per million BTU). On March 10, 2008, the Ministry of
Economy and Production of Argentina, through Resolution No. 127/2008 amended the
referred resolution and established that export tariffs would be equal to 100%
of the highest import price of natural gas into Argentina at any time (export
tariffs currently amount to US$ 7.80 per million BTU).
In the first quarter of 2008, the various unions gathering workers who perform
tasks in the oil fields operated by the Branch made several claims for salary
increases, reclassifications, labor continuity (for UOCRA personnel) and other
labor benefits. Such claims were peacefully made and, as a result, no action
measures affecting operations in general were taken. Claims were limited to
certain companies and did not prevent the other workers from working under
normal conditions, except for two days where, as a result of the action measures
taken, the contractors could not be taken to the oil field. In the second
quarter, the negotiation of the collective bargaining agreements of the Private
Oil Workers Union and Hierarchy Employees Union began. It is worth mentioning
that, since May 2, the production in the Piedra Clavada and Koluel Kaike blocks
has come to a standstill due to union conflicts.
During the first quarter of 2008, the Branch has continued with its investment
plans with a view to expanding its business and contributing to satisfying the
growing energy demand. The commitments assumed referred to in the following
paragraphs strengthen these expansion plans.
On December 6, 2006, Law No. 26197, known as "Hydrocarbons Short Law", was
passed. This law complied with the constitutional provision of transferring the
original ownership of the natural resources contained in the subsurface from the
Federal State to the producing provinces where oil fields are located.
Within this framework, the Branch entered into with the Argentine provinces of
Chubut (04/27/2007) and Santa Cruz (06/25/2007) two investment commitments and
agreements for the extension of the term of the concession for hydrocarbon
exploitation for a ten-year period in the blocks known as Cerro Drag�n, the area
of which is extended in the territory of both provinces, and Piedra Clavada and
Koluel Kaike in the province of Santa Cruz. The agreements expired between 2016
and 2017.
These agreements provided for, among other obligations, minimum investments of
US$2,000,000,000 in the Province of Chubut and of US$ 500,000,000 in the
Province of Santa Cruz to be made before 2017.
Furthermore, in order to enter into the operation agreements mentioned below,
other investments of US$ 1,000,000,000 in the Province of Chubut and US$
300,000,000 in the Province of Santa Cruz are to be made before 2027.
The agreements also provided for a US$ 80,000,000 investment commitment for
off-shore exploration, at the Branch's own risk, by means of two joint ventures
(UTEs) with the state-run companies Petrominera (in the case of Chubut) and
Fomicruz (in the case of Santa Cruz). If the Branch makes commercial
discoveries, an additional investment commitment will be required in the amount
of US$ 500,000,000 for the development of the offshore fields to be discovered.
The creation of the UTEs referred to in the preceding paragraph is consistent
with the provisions of sections 11 and 95 of the Hydrocarbon Law, which allows
state-owned companies to enter into agreements and create companies,
partnerships or other associations with individuals or entities for the
development of their activities.
The operation agreements executed with state-owned companies also fall within
the scope of the referred Law, which shall be effected as from the year 2027,
subject to compliance with the investments and Pan American Energy's exploration
success, so that it is allowed to evidence that it has developed sufficient
reserves to continue with the production of the fields of those areas as from
that year.
Based on these agreements, during the remaining term of the concessions, the
Branch agreed to pay to the respective provinces an additional amount of 3% of
the net revenues for certain items described in the agreements. The Branch will
also provide money for the development of infrastructure and the economic
diversification of the provinces of Chubut and Santa Cruz. A number of grants
will be awarded, loans given or guaranteed, job opportunities offered and
supplementary actions performed by the Branch as well.
The agreement with the province of Chubut was ratified by provincial law No.
5616 passed by the Provincial Congress on May 24, 2007, enacted by decree No.
500/2007 and published in the Official Bulletin on May 28, 2007.
The agreement with the province of Santa Cruz was ratified by provincial law No.
3009 issued by the Provincial Congress on March 13, 2008, enacted by decree No.
545/2008 and published in the Official Bulletin on March 27, 2008.
The execution of these agreements proposes a new horizon to sustain the increase
in production and reserves maintained by Pan American Energy in the Golfo San
Jorge basin. This new horizon and other regulatory and market conditions will
allow addressing long-term projects requiring sound investments, new
technologies and teams working for the future.
On January 28, 2008, Pan American Energy communicated that, as a result of its
ongoing exploration works in the Cerro Drag�n Area of the Province of Chubut, it
had made new findings of oil and natural gas reserves in the Northern and
Central regions of the Area, which, as a whole, account for one hundred million
equivalent oil barrels (boe).
Buenos Aires, May 9, 2008
Daniel Grinstein
Attorney-in-fact
PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH)
FINANCIAL STATEMENTS as of March 31, 2008
SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS AS OF MARCH 31, 2008
REQUIRED BY SECTION 68 OF THE REGULATIONS OF THE BUENOS AIRES STOCK EXCHANGE
Overall issues about the Branch's activity:
1. Specific and significant legal requirements which imply contingent
suspensions or changes of benefits provided for by such regulations:
The Branch is not subject to specific and significant legal requirements, which
may imply the contingent suspension or change of benefits provided for by such
regulations, except as disclosed in notes to the financial statements.
2. Significant changes in the Branch's activities or other similar circumstances
that affect the comparison of the financial statements with prior years, or with
those to be presented in future years.
There are no changes in the Branch's activities that significantly affect the
comparison of the financial statements as of March 31, 2008.
3. Breakdown of receivables and payables as per section 68, subsection 3.
3.a) The breakdown of receivables and payables based on the maturity thereof is
disclosed in Exhibit H to the financial statements.
The following receivables without any established term included in the referred
Exhibit H are due:
Current receivables
$
----------------------
Due from January to March 2008 11,254,173
Due from October to December 2007 7,463,720
Due from July to September 2007 17,379,968
Due from April to June 2007 9,819,739
Due from April 2006 to March 2007 1,310,867
Due from April 2005 to March 2006 9,520,137
Due from April 2004 to March 2005 455,619
Due from April 2003 to March 2004 493,151
Due from April 2002 to March 2001 950,962
Due from April 2001 to March 2002 176,367
Due from April 2000 to March 2001 83,700
----------------------
Total 58,908,403
======================
There are no overdue payables.
3.b) In connection with the receivables and payables in foreign currency, see
Exhibit F to the financial statements. There are no significant receivables and
payables represented by securities.
3.c) There are no receivables and payables subject to adjustment clauses.
3.d) In connection with the receivables and payables that accrue interest as of
March 31, 2008, see Exhibit H to the financial statements.
4. Corporations Art. 33 Law 19550
None.
5. Receivables or loans with directors, statutory auditors, and relatives
including up to the second degree:
None as of the date of issuance of these financial statements.
6. Physical counts of inventories
Based on the nature of the activity, the Branch carries out physical counts of
most of its inventories. There are no significant slow-moving inventories as of
March 31, 2008 for which an allowance has not been set up.
7. Current values
The valuation method of inventories is disclosed in Note 3.2.d) to the financial
statements.
8. Property, plant and equipment
No items of property, plant and equipment have been subject to appraisal.
To date, there are no property, plant and equipment items that are not in use
due to obsolescence.
9. Interests in other companies
None. The Branch's participating interests in joint operations and other
entities are disclosed in Note 2 to the financial statements.
10. Recoverable value
The recoverable value of inventories and fixed assets, used as a limit to their
valuation for financial reporting purposes, have been determined based on the
net realizable values and values in use, the latter defined as the expected net
cash flows that would result from both the use of the assets and the disposal
thereof at the end of their useful life.
11. Insurance
As of March 31, 2008, the insurance taken on the Branch's assets are as follows:
Insured assets Insured risk Covered amount
-------------------------------------------------------- ------------------------- --------------------------
Thousand US$
Equipment, facilities and pipelines
applied to exploitation and transportation Physical damage 702,815
Equipment, facilities and pipelines
applied to exploitation and transportation Liability insurance 10,000
Wells Control, re-drilling,
spill 72,037
Additionally, the Branch has taken the following policies: workers compensation
insurance, directors and officers' liability insurance and automobile liability
insurance.
12. Negative and positive contingencies
To calculate the related accruals, all available elements of judgment and
probability of occurrence have been considered (see Notes 10, 13 and Exhibit D
to the basic financial statements).
13. Contingent events as of the date of issuance of the financial statements
with moderate likelihood of occurrence, the financial effects of which have not
been fully recorded as of March 31, 2008.
None.
Irrevocable advances for future subscriptions
14. As of March 31, 2008 there are no irrevocable advances for future
subscriptions.
15. There are no preferred shares as of the date of issuance of these financial
statements.
16. As of the date of issuance of these financial statements, the Branch has no
restrictions on the distributions of earnings, except as indicated in Note 10.
Buenos Aires, May 7, 2008
Daniel Grinstein
Attorney-in-fact
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