Apco Oil and Gas generated net income attributable to Apco of $23.5 million in 2009, or $0.80 per share, compared with net income of $23.8 million, or $0.81 per share in 2008.
Net income attributable to Apco was slightly lower than 2008 as the favorable effects of increased sales volumes and lower exploration expenses were more than offset by the combination of lower average oil and LPG sales prices, greater depreciation expense, lower investment income and greater income tax expense.
Apco's operating revenues increased by $3.6 million in 2009 compared with 2008. Revenues for 2009 were higher due to the benefits of increased oil, natural gas and LPG sales volumes and higher natural gas sales prices. These benefits were partially offset by lower average oil and LPG sales prices.
"Our track record of successful drilling in our core properties in the Neuquen basin helped increase our oil sales volumes for the year, which more than offset a six-percent decrease in oil prices," said Ralph Hill, Apco's chairman and chief executive officer.
Total sales volumes of 2.4 million barrels of oil equivalent (BOE) for the year applicable to Apco's consolidated interest was 14 percent above the comparable 2.1 million BOE in 2008.
Oil sales volumes increased nine percent during the year, reflecting the previously mentioned successful drilling in Neuquen basin properties and increased condensate production associated with greater natural gas production.
Natural gas sales volumes increased 21 percent due to well connections and production facility enhancements in Apco's Tierra del Fuego properties that allowed for greater volumes of gas to be delivered compared to the prior-year.
Total costs and operating expenses in 2009 decreased by $347,000 compared with 2008. This reflects lower exploration activity, including the absence of $3.7 million in exploration expenses for dry-hole and greater amounts of seismic expense recorded in 2008.
Lower exploration expenses offset the combination of higher depreciation, depletion and amortization expense, greater selling and administrative expense and increased provincial production taxes for the year.
During 2009, total investment income decreased by $2.9 million due to lower interest and other income and lower equity income from Argentine investments.
Apco experienced lower equity income from its 40.803 percent interest in Petrolera Entre Lomas S.A. Petrolera's net income was lower primarily due to lower average oil and LPG sales prices and greater production costs attributable to operations in the Entre Lomas, Bajada del Palo and Charco del Palenque concessions.
Total sales volumes applicable to Apco's equity interest in Petrolera were 2.0 million BOE, reflecting an increase compared to 1.8 million BOE in 2008.
2009 and 2010 Capital Programs
During 2009, capital expenditures of $20.5 million were invested primarily for development and exploration drilling in the Entre Lomas and Bajada del Palo concessions, along with a seventh productive well in the Agua Amarga exploration permit.
"After experiencing lower oil prices earlier in 2009, we scaled back capital expenditures in our other joint ventures in Argentina to focus our resources on drilling in our Neuquen basin properties where we have had a history of high success while also commencing our exploration programs in Colombia," said Thomas Bueno, Apco's president and chief operating officer.
"In 2010, we plan to re-commence drilling in our other properties in Argentina and grow our presence in the Neuquen basin, as demonstrated with our recently announced farm-in agreement in the Coiron Amargo exploration permit.
"In Colombia, we will complete our seismic commitments and expect to start exploration drilling before the end of the year," Bueno added.
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