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Pan American Energy LLC, Argentine Branch PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH) FINANCIAL STATEMENTS AS OF DECEMBER 31, 2007 COMPARATIVE WITH THE PRIOR YEAR CONTENTS Auditors' report 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 Reporting summary Supplementary information required by the Buenos Aires Stock Exchange AUDITORS' REPORT ON FINANCIAL STATEMENTS To the Legal Representative of Pan American Energy LLC (Argentine Branch) Av. Leandro N. Alem 1180 - 11th Floor Buenos Aires C.U.I.T.: 30-69554247-6 We examined the accompanying balance sheet of Pan American Energy LLC (Argentine Branch) as of December 31, 2007 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 year then ended, comparative with the prior year. The preparation of these financial statements is the responsibility of the Legal Representative of the Branch. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards in force in the Republic of Argentina. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the reasonableness of the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In relation to the financial statements as of December 31, 2006 and for the year then ended, presented for comparative purposes, we issued an unqualified opinion in our audit report dated March 9, 2007. In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Branch as of December 31, 2007, the results of its operations and the changes in cash flows for the year then ended, in conformity with the professional accounting principles in force in the City of Buenos Aires (Republic of Argentina). 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 Argentina which, in their formal aspects, are kept pursuant to legislation in force. The information systems used to process the data included in the financial statements are kept under the security and integrity conditions based on which they were authorized; b. we read the information included in the reporting summary (sections "Balance sheet items", "Income statement items", "Statistical data" and "Ratios") and in the supplementary information to the financial statements required by section 68 of the regulations of the Buenos Aires Stock Exchange, based on which, as far as it relates to our area of responsibility, we have no observations; c. as of December 31, 2007, the accrued liability for pension contributions arising from the accounting records amounted to $ 6,649,458, no amounts being due as of that date, and d. as required by General Resolution No. 400 of the National Securities Commission: -- the ratio between the total audit services invoiced to the Branch and the total amount invoiced to the Branch, including audit services, is 0.59%; -- the ratio between the total audit services invoiced to the Branch and the total audit services invoiced to the Branch and its subsidiaries and affiliated companies is 0.80%, and -- the ratio between the total audit services invoiced to the Branch and the total amount invoiced to the Branch and its subsidiaries and affiliated companies is 0.51%. Buenos Aires, March 7, 2008 SIBILLE Graciela C. Laso Partner PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH) FINANCIAL STATEMENTS as of December 31, 2007 for the fiscal year No. 11 beginning January 1, 2007 and ended December 31, 2007 comparatively presented with the prior year 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 December 31, 2007 comparative with the prior year (in pesos) 12/31/2007 12/31/2006 ------------------ ------------------ ASSETS CURRENT ASSETS Cash on hand and in banks (Note 4 a) 33,987,608 34,350,572 Investments (Exhibit C) 451,093,477 215,056,665 Accounts receivable (Note 4 b) 497,884,676 737,519,309 Other receivables (Note 4 c) 88,459,852 117,891,798 Inventories (Note 4 d) 189,479,197 130,809,611 ------------------ ------------------ Total current assets 1,260,904,810 1,235,627,955 ------------------ ------------------ NON CURRENT ASSETS Other receivables (Note 4 e) 53,139,229 28,915,445 Investments (Exhibit C) 9,533,846 8,719,558 Property, plant and equipment (Exhibit A) 7,383,251,413 5,870,488,156 Intangible assets (Exhibit B) 390,469 1,918,767 ------------------ ------------------ Total non current assets 7,446,314,957 5,910,041,926 ------------------ ------------------ Total assets 8,707,219,767 7,145,669,881 ================== ================== LIABILITIES CURRENT LIABILITIES Accounts payable (Note 4 f) 645,049,836 661,464,349 Loans (Note 4 g) 745,307,677 877,022,350 Payroll and social security contributions 42,426,954 32,833,398 Taxes payable (Note 4 h) 271,153,439 465,157,941 Provision for future compensation to personnel (Exhibit D) 2,461,743 1,968,408 ------------------ ------------------ Total current liabilities 1,706,399,649 2,038,446,446 ------------------ ------------------ NON CURRENT LIABILITIES Accounts payable (Note 4 i) 49,129,413 32,579,735 Loans (Note 4 j) 2,984,559,219 2,265,642,982 Other liabilities (Note 3.2.j) 128,930,896 97,036,602 Deferred tax (Note 3.2.h and 11) 389,697,321 441,951,134 Provision for future compensation to personnel (Exhibit D) 15,241,426 9,797,018 Provision for environmental remediation (Exhibit D) 82,182,464 122,553,250 Accruals (Exhibit D) 20,217,498 19,903,786 ------------------ ------------------ Total non current liabilities 3,669,958,237 2,989,464,507 ------------------ ------------------ Total liabilities 5,376,357,886 5,027,910,953 Account with Head Office (Note 7) 2,869,622,874 1,656,519,921 Capital allocated to the Branch (Note 8) 221,779,007 221,779,007 Capital adjustment 239,460,000 239,460,000 ------------------ ------------------ Total 8,707,219,767 7,145,669,881 ================== ================== The accompanying notes and exhibits are an integral part of these financial statements. PAN AMERICAN ENERGY LLC (ARGENTINE BRANCH) STATEMENT OF INCOME for the year ended December 31, 2007 comparative with the prior year (in pesos) 2007 2006 ------------------------------ ----------------------------- Sales 5,529,608,286 5,349,672,587 Cost of sales (Exhibit E) (2,690,291,924) (2,379,583,352) --------------- --------------- Gross profit 2,839,316,362 2,970,089,235 Administrative expenses (Exhibit G) ( 266,094,396) ( 226,429,454) --------------- --------------- Operating income 2,573,221,966 2,743,659,781 Financial results Generated by assets Interest 35,470,760 56,391,423 Exchange gains/losses 19,684,649 10,169,992 Other financial results ( 1,001,993) 54,153,416 2,293,677 68,855,092 -------------- ------------- Generated by liabilities Interest ( 262,155,875) (179,682,702) Exchange gains/losses ( 74,320,337) ( 21,319,803) Other financial results ( 51,996,033) ( 388,472,245) ( 25,082,167) ( 226,084,672) -------------- ------------- Other income and expenses - net (Note 3.2.j and Exhibit D, lines 9 and 11) ( 24,199,544) ( 41,522,382) --------------- --------------- Income before income tax 2,214,703,593 2,544,907,819 Income tax expense - current (Note 3.2 h and 11) ( 831,214,623) ( 896,407,452) Income tax (expense) benefit - deferred (Note 3.2.h and 11) 52,253,813 ( 3,463,245) --------------- --------------- Net income (Note 7) 1,435,742,783 1,645,037,122 =============== =============== 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 year ended December 31, 2007 comparative with the prior year (in pesos) 2007 2006 ------------------ ---------------- Cash provided by operations: Net income 1,435,742,783 1,645,037,122 Adjustments to reconcile net income with the cash provided by operations Depreciation of property, plant and equipment 769,123,691 638,177,818 Amortization of intangible assets 1,528,298 2,215,059 Income tax expense 831,214,623 896,407,452 Net (decrease) increase in allowances for bad debtors, obsolescence of materials and accruals for lawsuits ( 7,678,801) 2,283,351 Gain on disposal of property, plant and equipment 45,388,175 1,421,822 Increase in provision for future compensation to personnel 8,281,606 7,395,291 Net increase in the provision for environmental remediation 6,634,369 4,478,360 Other non-cash items (1) 214,691,173 159,537,645 Changes in assets, liabilities and account with Head Office: Decrease (increase) in accounts receivable 248,450,322 ( 203,963,920) Increase in inventories ( 59,114,874) ( 8,197,255) Decrease in other current receivables 29,431,946 32,203,095 (Increase) decrease in other non current receivables ( 24,223,784) 42,988,316 Increase in accounts payable, payroll and social security contributions, taxes payable and other liabilities 65,114,075 235,305,695 Compensation paid to personnel pursuant to defined benefit plans ( 2,343,863) ( 2,175,319) Payments related to lawsuits ( 377,888) ( 859,383) Income tax paid (1,048,710,185) ( 792,704,461) ------------------ ---------------- Net cash provided by operations 2,513,151,666 2,659,550,688 ================== ================ Cash used in investing activities: Increase in long-term investments ( 814,288) ( 3,028,365) Acquisition of property, plant and equipment (2,391,212,746) (1,696,444,812) Additions of intangible assets - ( 417,106) Proceeds from the sale of property, plant and equipment 16,932,468 1,839,882 ------------------ ---------------- Cash used in investing activities (2,375,094,566) (1,698,050,401) ------------------ ---------------- Cash provided by (used in) financing activities: Increase in loans (net) 320,256,578 954,727,802 Net activity with Head Office ( 222,639,830) (2,050,114,950) ------------------ ---------------- Cash provided by (used in) financing activities 97,616,748 (1,095,387,148) ------------------ ---------------- Net increase (decrease) in cash 235,673,848 ( 133,886,861) Cash at beginning of year (2) 249,407,237 383,294,098 ------------------ ---------------- Cash at year-end (2) 485,081,085 249,407,237 ================== ================ (1) It is made up of: Exchange gains/losses and other financial results relating to loans and other 266,944,986 156,074,400 Deferred income tax expense (benefit) ( 52,253,813) 3,463,245 ------------------ ---------------- Total 214,691,173 159,537,645 ================== ================ (2) Cash and banks plus investments becoming due within three months. The accompanying notes and exhibits are an integral part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS as of December 31, 2007 comparative with the prior year (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 year ended December 31, 2007. Activity Main blocks/ operations Ownership Branch's interest participation --------------------------------------- ------------------------------------ ---------- ------------------ Oil and gas production and development Cerro Dragón 100.00% Operator Piedra Clavada 100.00% Operator Koluel Kaike 100.00% Operator Lindero Atravesado 62.50% Operator Anticlinal Funes 80.00% Operator Acambuco 52.00% Operator Aguada Pichana 18.18% 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 Zanjón", 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 ("Comisión 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 City of Buenos Aires (Republic of Argentina) and pursuant to the provisions of the CNV. Investments to become due or to be realized in the short term (3 months) 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 year. 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 is 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 restated amounts totals $ 85,358,131 as of December 31, 2007. 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 legal counsel. 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 deducted 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 December 31, 2007 and 2006 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 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 management of the Branch 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 year. 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 amounts to $ 128,930,896 ($ 97,036,602 as of December 31, 2006) presented under Other non current liabilities, out of which the amount of $ 32,152,231 accrued in the fiscal year ended December 31, 2007. Such amount is made up of $ 244,526,834 of nominal value less $ 115,292,099 corresponding to the financial effect from the discount to present value and payments in the amount of $ 303,839. In the fiscal year ended December 31, 2006, the amount accrued in connection with the referred "Plan Puente" was $ 27,394,646. Such amount was made up of $ 169,818,815 of nominal value less $ 72,736,311 corresponding to the financial effect from the discount to present value and payments in the amount of $ 45,902. As of December 31, 2007 and 2006, the relevant actuarial information related to the pension plans for the benefit of personnel included herein and in Note 3.2.g under Other liabilities, Provisions for future compensation to personnel and Account with Head Office is as follows: 2007 2006 ------------------ ------------------ Cost of benefits accrued at beginning of year 130,160,026 96,784,802 Service cost (1) (Exhibit D) 9,119,269 6,350,558 Interest (2) 18,435,178 14,296,029 Benefits paid ( 4,278,590) ( 2,071,223) Actuarial losses (1) (Exhibit D) 13,397,780 14,799,860 ------------------ ------------------ Obligation at year-end 166,833,663 130,160,026 ================== ================== (1) Included under Cost of sales and Administrative expenses of the statement of income (See Exhibit G) (2) Included under Other financial results provided by liabilities of the statement of income Main actuarial assumptions used Actual rate of long term compensation increase (net of inflation) 1% 1% Interest rate 4% 4% 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 crude 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 rental expense incurred is recognized in the Statement of income as it accrues. The lease expenditur, broken down by maturity dates, are reported below: Nominal value ------------------------------- Up to a year US$ 2,668,732 and $ 1,201,897 Over one year and up to five years US$ 2,590,299 and $ 1,773,099 During the year ended December 31, 2007, the Branch recognized an expense of $ 9,461,634 related to such lease agreements presented in the line Buildings Rentals and Maintenance in Exhibit G. m) Enactment of new technical resolutions and other regulations In line with General Resolution No. 487/2006 of the CNV, the Branch has considered the currency restatement of property, plant and equipment as a temporary difference for the purposes of the deferred tax calculation. Consequently, at the beginning of the fiscal year 2006, an increase in the net deferred tax liabilities amounting to $229,088,577 was recognized, as well as an adjustment to prior year results (loss) presented as part of the Account with Head Office (Note 7). As required by Resolution No. 487/2006 of the CNV in connection with the recoverable values of assets, at the balance sheet date no indicators exist that the carrying value of the assets exceeds the recoverable value. NOTE 4 - BREAKDOWN OF CERTAIN BALANCE SHEET ACCOUNTS NOTE 4 - BREAKDOWN OF CERTAIN BALANCE SHEET ACCOUNTS 12/31/2007 12/31/2006 ------------------ ------------------ ASSETS CURRENT ASSETS a) Cash and banks Cash on hand in local currency 219,522 141,977 Cash on hand in foreign currency (Exhibit F) 185,683 232,722 Cash in banks in local currency 33,403,569 24,481,235 Cash in banks in foreign currency (Exhibit F) 178,834 9,494,638 ------------------ ------------------ Total 33,987,608 34,350,572 ================== ================== b) Accounts receivable Accounts receivable in local currency 120,830,313 73,659,586 Allowance for bad debtors in local currency (Exhibit D) ( 10,197,186) ( 4,983,016) Accounts receivable in foreign currency (Exhibit F) 387,251,549 682,872,598 Allowance for bad debtors in foreign currency (Exhibits D and F) - ( 14,029,859) ------------------ ------------------ Total 497,884,676 737,519,309 ================== ================== c) Other receivables Loans to personnel 9,436,752 8,490,283 Tax credits 11,845,980 24,907,001 Expenses recoverable in local currency 5,105,747 7,310,337 Expenses recoverable in foreign currency (Exhibit F) 1,923,308 1,284,463 Prepaid expenses in local currency 14,164,348 7,648,706 Miscellaneous in local currency 34,220,853 39,819,127 Miscellaneous in foreign currency (Exhibit F) 9,476,145 28,032,599 Affiliated companies in foreign currency (Note 9 and Exhibit F) 2,286,719 399,282 ------------------ ------------------ Total 88,459,852 117,891,798 ================== ================== d) Inventories Crude oil in stock 116,679,969 69,704,063 Spare parts, materials and raw materials 56,281,193 47,997,293 ------------------ ------------------ Subtotal (Exhibit E) 172,961,162 117,701,356 Allowance for obsolescence of materials (Exhibit D) ( 3,309,418) ( 2,864,130) ------------------ ------------------ Subtotal 169,651,744 114,837,226 Goods in transit 14,921,350 7,924,880 Advances to suppliers in local currency 4,333,388 7,765,719 Advances to suppliers in foreign currency (Exhibit F) 572,715 281,786 ------------------ ------------------ Total 189,479,197 130,809,611 ================== ================== NON CURRENT ASSETS e) Other receivables Loans to personnel 11,037,708 3,837,996 Prepaid expenses in local currency 1,377,539 4,534,641 Miscellaneous in local currency 26,419,281 6,517,545 Miscellaneous in foreign currency (Exhibit F) 14,304,701 14,025,263 ------------------ ------------------ Total 53,139,229 28,915,445 ================== ================== LIABILITIES CURRENT LIABILITIES f) Accounts payable Trade payables in local currency 440,920,083 449,624,468 Trade payables in foreign currency (Exhibit F) 159,701,798 167,263,681 Expenses payable in local currency 39,244,409 34,598,789 Affiliated companies in foreign currency (Note 9 and Exhibit F) 5,183,546 9,977,411 ------------------ ------------------ Total 645,049,836 661,464,349 ================== ================== g) Loans Bonds in foreign currency (Exhibit F) - 306,200,000 Unsecured notes payable in local currency 263,824,044 275,057,276 Secured notes payable in foreign currency (Exhibit F) - 4,172,593 Unsecured notes payable in foreign currency (Exhibit F) 405,650,487 226,105,569 Interest accrued on bonds and notes payable in foreign currency (Exhibit F) 75,833,146 65,486,912 ------------------ ------------------ Total 745,307,677 877,022,350 ================== ================== h) Taxes payable Income tax provision net of prepayments 174,142,115 391,273,549 Tax on sales and production of hydrocarbons 87,217,728 64,989,555 Other 9,793,596 8,894,837 ------------------ ------------------ Total 271,153,439 465,157,941 ================== ================== NON CURRENT LIABILITIES i) Accounts payable Miscellaneous liabilities in local currency 31,777,958 15,707,663 Miscellaneous liabilities in foreign currency (Exhibit F) 17,351,455 16,872,072 ------------------ ------------------ Total 49,129,413 32,579,735 ================== ================== j) Loans Affiliated companies in local currency (Note 9) - 446,709,189 Bonds in foreign currency (Exhibit F) 1,102,150,000 1,071,700,000 Unsecured notes payable in foreign currency (Exhibit F) 1,882,409,219 747,233,793 ------------------ ------------------ Total 2,984,559,219 2,265,642,982 ================== ================== 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 issueance 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 Pan American Energy LLC (Argentine Branch) obtained the following loans at a five-year term, with interest compounded bi-annually amortized in monthly installments: 1) On July 20, 2001, in the amount of US$ 72,051,406, with interest accruing at an annual rate of 7.54%, with the first installment falling due on April 19, 2002 and the repayment term being completed on June 20, 2006, and 2) on September 17, 2001, in the amount of US$ 40,001,944, with interest accruing at an annual rate of 6.72%, with the first installment falling due on June 20, 2002 and completing repayment on August 21, 2006. For the purpose of fixing the interest rate, the Branch entered into integrated derivative transactions, the impact of which has been included in the cost of the transactions. Both loans were guaranteed by Pan American Energy LLC until the repayment thereof in June and August 2006. 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 half yearly basis and becoming due in April 2018; and - "B", Sub-tranch "1" in the amount of US$ 158,500,000 amortizable on a half yearly basis and becoming due in April 2014 and Sub-tranch "2" in the amount of US$ 241,500,000 amortizable on a half yearly 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 Dragón area in 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. The remaining 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 as of December 31, 2007. NOTE 7 - ACCOUNT WITH HEAD OFFICE The changes in the account with Head Office during the fiscal years ended December 31, 2007 and 2006 are as follows: Fiscal year Fiscal year ended ended 12/31/2007 12/31/2006 ---------------- ------------------- Balance at beginning of fiscal year of Account with Head Office 1,656,519,921 2,290,686,326 Adjustment to prior-fiscal year results (Note 3.2.m) - ( 229,088,577) ---------------- ------------------- Balance at beginning of the fiscal year of Account with Head Office after adjustment 1,656,519,921 2,061,597,749 Net activity with Head Office ( 222,639,830) (2,050,114,950) Transfer of net income 1,435,742,783 1,645,037,122 ---------------- ------------------- Net changes for the fiscal year 1,213,102,953 ( 405,077,828) ---------------- ------------------- Balance at fiscal year-end of Account with Head Office (1) 2,869,622,874 1,656,519,921 ================ =================== (1) As of December 31, 2007 and December 31, 2006 balances are stated 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 Río 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: 2007 2006 ----------------------------------- TRANSACTIONS Pan American Fueguina S.A. Purchases - 899,281 Financing (446,709,189) 446,709,189 Pan American Sur S.A. Lending of LPG ( 8,181,231) 8,181,231 Gas purchases 3,273,306 - PAE E & P Bolivia Ltd. Purchases and hiring of services 871,594 - PAE Oil & Gas Bolivia Ltd. Purchases and hiring of services 1,015,843 52,482 BP West Coast Products LLC Sales 749,493,336 1,197,372,640 BP America Production Company Services 2,425,167 5,299,091 NOTE 9 - TRANSACTIONS AND BALANCES WITH AFFILIATED COMPANIES (cont.) 12/31/2007 12/31/2006 ------------------------ ------------------- BALANCES Pan American Fueguina S.A. Accounts payable - 899,281 Loans - 446,709,189 Pan American Sur S.A. Accounts payable 3,273,306 8,181,231 PAE E & P Bolivia Ltd. Other receivables 1,165,277 293,683 PAE Oil & Gas Bolivia Ltd. Other receivables 1,121,442 105,599 BP America Production Company Accounts payable 1,910,240 896,899 NOTE 10 - GUARANTEES AND OTHER COMMITMENTS In terms of investment commitments, the Branch has not granted any guarantees as of December 31, 2007. The terms and conditions 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 $ 10,601,137 as of December 31, 2007, in favor of the Branch, which has not been recorded. Such receivable will be collected when the crude oil WTI price falls below US$28.50 per barrel. The price thereof was US$ 96.00 as of December 31, 2007. 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: 12/31/2007 12/31/2006 ------------------- ------------------ Deferred tax assets Allowance of materials obsolescence 1,158,296 1,002,446 Provision for future compensation to personnel 6,093,622 4,296,053 Accrual for lawsuits 7,278,725 7,082,362 Provision for environmental remediation 11,231,039 9,835,326 Other provisions and allowances 18,656,518 18,174,616 ------------------- ------------------ Total deferred tax assets 44,418,200 40,390,803 ------------------- ------------------ Deferred tax liabilities Inventories - materials and spare parts 890,517 962,248 Property, plant and equipment 392,076,489 458,338,264 Other 41,148,515 23,041,425 ------------------- ------------------ Total deferred tax liabilities 434,115,521 482,341,937 ------------------- ------------------ Net deferred tax liabilities 389,697,321 441,951,134 =================== ================== The reconciliation between the income tax expense for the fiscal year and that resulting from applying the prevailing tax rate to income before tax is as follows: 2007 2006 ------------------- ------------------ Net income before taxes 2,214,703,593 2,544,907,819 Prevailing tax rate 35% 35% ------------------- ------------------ Net income at prevailing tax rate ( 775,146,258) ( 890,717,737) Permanent differences at the tax rate: Miscellaneous - net ( 3,814,552) ( 9,152,960) ------------------- ------------------ Subtotal permanent differences at the tax rate ( 3,814,552) ( 9,152,960) ------------------- ------------------ Income tax - total ( 778,960,810) ( 899,870,697) =================== ================== Current income tax expense ( 831,214,623) ( 896,407,452) Deferred income tax benefit (expense) 52,253,813 ( 3,463,245) ------------------- ------------------ ( 778,960,810) ( 899,870,697) =================== ================== NOTE 12 - RESTRICTED ASSETS In November 2006, the Branch collected a bank deposit made in its own name as a collateral for a loan from a foreign bank in fiscal year 2003. Such bank deposit amounted to US$ 2,505,351. In August 2007, the Branch collected a bank deposit made in its own name as a 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 a collateral for outstanding accounts payable that were paid in June 2007. Therefore, there are no restricted assets as of December 31, 2007. 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, 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 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 Dragón, 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. These investments are to be made before 2017 and are destined to onshore activities. Other investments of US$ 1,000,000,000 in the Province of Chubut and of 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 offshore 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 Hydrocarbons 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 and will be enforced as from the year 2027, subject to compliance with the investments and Pan American Energy's exploration success, in that it will have developed sufficient reserves to continue with the production of the fields of those areas as from that year. 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 Government of the Province of Santa Cruz has sent the agreement to the Provincial Congress for its approval, which is pending. NOTE 15 - SUBSEQUENT EVENTS On January 28, 2008, Pan American Energy announced that, based on its permanent exploration activities in Cerro Dragón block, it has been able to find new oil and natural gas reserves which were identified in the Northern and Central areas of such block in the province of Chubut, totaling one hundred million barrels of oil equivalent (boe). No events or transactions have occurred from year-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 PROPERTY, PLANT AND EQUIPMENT (in pesos) as of December 31, 2007 and as of December 31, 2006 Original values ------------------------------------------------------------------------------------ At beginning Increases for At Main account of year the year Transfers Decreases year-end ------------ -------------- ------------- --------------- -------------------------- Land and buildings 53,902,203 45,000 9,234,088 - 63,181,291 Plants, wells and exploration and production facilities 12,045,371,439 159,021,174 1,979,510,239 151,295,611 14,032,607,241 Furniture and office supplies 8,090,645 41,348 17,396 - 8,149,389 Equipment 130,526,906 - 25,101,986 - 155,628,892 Vehicles 37,318,081 - 11,981,533 1,218,395 48,081,219 Work in progress 610,477,077 2,222,777,724 (2,025,845,242) 2,487,954 804,921,605 Advances to suppliers 24,040,065 16,130,812 - - 40,170,877 -------------- ------------- --------------- ----------- -------------- Total as of 12/31/2007 12,909,726,416 2,398,016,058 - 155,001,960 15,152,740,514 ============== ============= =============== =========== ============== Total as of 12/31/2006 11,215,074,160 1,714,133,505 - 19,481,249 12,909,726,416 ============== ============= =============== =========== ============== Depreciation --------------------------------------------------------------- Accumulated Accumulated Net Net at beginning at as of as of Main account of year Increases Decreases year-end 12/31/07 12/31/06 ------------------------- ------------ ---------- ------------- ------------- ------------- (1) (2) Land and buildings 25,181,488 2,974,030 - 28,155,518 35,025,773 28,720,715 Plants, wells and exploration and production facilities 6,880,673,207 741,559,559 37,696,825 7,584,535,941 6,448,071,300 5,164,698,232 Furniture and office supplies 7,895,688 85,842 - 7,981,530 167,859 194,957 Equipment 102,450,577 19,031,463 - 121,482,040 34,146,852 28,076,329 Vehicles 23,037,300 5,472,797 1,176,025 27,334,072 20,747,147 14,280,781 Work in progress - - - - 804,921,605 610,477,077 Advances to suppliers - - - - 40,170,877 24,040,065 ------------- ------------ ---------- ------------- ------------- ------------- Total as of 12/31/2007 7,039,238,260 769,123,691 38,872,850 7,769,489,101 7,383,251,413 ============= ============ ========== ============= ============= Total as of 12/31/2006 6,417,279,987 638,177,818 16,219,545 7,039,238,260 5,870,488,156 ============= ============ ========== ============= ============= (1) See Exhibit G. (2) See depreciation policies in Note 3.2.e. EXHIBIT B INTANGIBLE ASSETS (in pesos) as of December 31, 2007 and as of December 31, 2006 Original Values Amortization ------------------------------------------- ------------------------------------------- Accumulated Decreases At Increases Decreases at for Accumulated Net Net Main beginning for for At beginning For the the year at as of as of account of year the year the year year end of year year year-end 12/31/07 12/31/06 ------------ ----------- --------- --------- ----------- ----------- --------- --------- ----------- -------- --------- (1) (2) Pre- operating expenses 48,740,915 - - 48,740,915 48,300,969 52,105 - 48,353,074 387,841 439,946 Acquisition cost of blocks 6,487,247 - - 6,487,247 6,276,829 207,790 - 6,484,619 2,628 210,418 Deferred charges 63,488,027 - - 63,488,027 62,219,624 1,268,403 - 63,488,027 - 1,268,403 ----------- --------- --------- ----------- ----------- --------- --------- ----------- -------- --------- Total as of 12/31/2007 118,716,189 - - 118,716,189 116,797,422 1,528,298 - 118,325,720 390,469 =========== ========= ========= =========== =========== ========= ========= =========== ======== ========= Total as of 12/31/2006 118,299,083 417,106 - 118,716,189 114,582,363 2,215,059 - 116,797,422 1,918,767 =========== ========= ========= =========== =========== ========= ========= =========== ======== ========= (1) See Exhibit G. (2) See depreciation policies in Note 3.2.f. EXHIBIT C OTHER INVESTMENTS (in pesos) as of December 31, 2007 and as of December 31, 2006 Book value Book value Main account 12/31/2007 12/31/2006 -------------------------------------------------------- -------------------- ------------ Short-term investments Mutual funds in foreign currency (Exhibit F) 1,138 215,056,665 Class: Citi Institutional Liquid Reserves Quantity: 366 units Quoted value: US$ 1 (US dollar) Government securities "Certificados de cancelación de deuda impositiva" (Government of the Province of Chubut) Coupons Nos. 14, 18 and 19 1,500,411 - Time deposits in foreign currency (Exhibit F) 218,595,022 - Special deposit account in foreign currency (Exhibit F) 230,996,906 - -------------------- ------------ Total short-term investments 451,093,477 215,056,665 -------------------- ------------ Long-term investments Government securities: Bonos de la República Argentina - Discount bonds in pesos 5.83% final maturity in 2033 Quantity: 4,821,350 Face value: $ 1 Quoted value: $ 1,16 5,592,766 7,015,064 GDP coupon in pesos Quantity: 14,306,676 Face value: $ 1 Quoted value: $ 0,088 1,258,987 1,702,494 "Certificados de cancelación de deuda impositiva" (Government of the Province of Chubut) Coupons Nos. 20 to 23 2,680,093 - Shares: Garantizar S.A. Quantity: 2000 Class: B Face value: $ 1 2,000 2,000 -------------------- ------------ Total long-term investments 9,533,846 8,719,558 -------------------- ------------ Total investments 460,627,323 223,776,223 -------------------- ------------ EXHIBIT D ALLOWANCES, PROVISIONS AND ACCRUALS (in pesos) as of December 31, 2007 and as of December 31, 2006 Balances at Decreases Balances as beginning of Increases for for the of Main account year the year year 12/31/07 ----------------------------------- ---------------- ------------- ----------- ------------- Deducted from current assets: Allowance for bad debtors in local currency 4,983,016 5,903,164 (1) 688,994 (2) 10,197,186 Allowance for bad debtors in foreign currency 14,029,859 219,594 (3) 14,249,453 (4) - Allowance for obsolescence of materials 2,864,130 445,288 (5) - 3,309,418 ---------------- ------------- ----------- ------------- Total deducted from assets 21,877,005 6,568,046 14,938,447 13,506,604 ================ ============= =========== ============= Included in current liabilities: Provision for future compensation to personnel 1,968,408 493,335 (6) - 2,461,743 ---------------- ------------- ----------- ------------- Subtotal current liabilities 1,968,408 493,335 - 2,461,743 ---------------- ------------- ----------- ------------- Included in non current liabilities: Accrual for lawsuits 19,903,786 746,126 (7) 432,414 (8) 20,217,498 Provision for environmental remediation 122,553,250 14,867,109 (9) 55,237,895 (10) 82,182,464 Provision for future compensation to personnel 9,797,018 8,281,606 (11) 2,837,198 (12) 15,241,426 ---------------- ------------- ----------- ------------- Subtotal non current liabilities 152,254,054 23,894,841 58,507,507 117,641,388 ---------------- ------------- ----------- ------------- Total included in liabilities 154,222,462 24,388,176 58,507,507 120,103,131 ================ ============= =========== ============= (1) Charges for the fiscal year included in Administrative Expenses of the Statement of Income (See Exhibit G). (2) Uses for the fiscal year. (3) Charges for the fiscal year included in financial results provided by assets, exchange gains/losses of the Statement of Income. (4) Recoveries for the fiscal year. (5) Charges for the fiscal year. They are included in production costs (see Exhibit G) of the Statement of Income. (6) Transfer from the non current provision for future compensation to personnel. (7) Charges for the fiscal year included in Administrative Expenses of the Statement of Income (See Exhibit G). (8) It is made up of $ 377,888 corresponding to payments for the fiscal year and $ 54,526 corresponding to recoveries for the fiscal year. (9) Charges for the fiscal year. It is made up of $ 6,655,077 included in financial results provided by liabilities, $ 6,803,312 included in plants, wells and exploration and production facilities and $ 1,408,720 included in other income and expenses of the Statement of Income. (10) Decreases in the amounts capitalized included (in plants, wells and exploration and production facilities) amounting to $ 53,808,467 and uses for the fiscal year of $ 1,429,428. (11) Charges for the fiscal year. They are included in other financial results of the Statement of Income and in Exhibit G. (12) It is made up of the compensation paid during the fiscal year amounting to $ 2,343,863 and the transfer referred to in line 6 of $493,335. EXHIBIT E COST OF SALES (in pesos) For the fiscal year beginning January 1, 2007 and ended December 31, 2007, comparative with the prior fiscal year 2007 2006 ------------------- ------------------ Inventories at the beginning of the year 117,701,356 107,032,601 Purchases 210,238,684 231,050,230 Production costs (Exhibit G) 2,535,313,046 2,159,201,877 Inventories at fiscal year-end ( 172,961,162) ( 117,701,356) ------------------- ------------------ Cost of sales 2,690,291,924 2,379,583,352 =================== ================== EXHIBIT F ASSETS AND LIABILITIES IN FOREIGN CURRENCY as of December 31, 2007 and as of December 31, 2006 Amount and type Amount Amount and type Amount in of Exchange in local of foreign local foreign currency currency as currency currency as of of Item as of rate as of 12/31/2007 12/31/2007 12/31/2006 12/31/2006 ------------------------ ----------------- -------- ----------- ------------------ ------------- US$ Euros $ (1) (1) US$ Euros (2) (2) ASSETS CURRENT ASSETS Cash on hand and in banks Cash on hand - 4,370 4.5724 19,981 - 4,370 17,419 53,298 - 3.109 165,702 185,683 71,245 215,303 232,722 ----------- ----------- Cash in banks Domestic 25,275 - 3.109 78,581 3,472 10,491 Foreign 32,246 - 3.109 100,253 178,834 3,138,368 9,484,147 9,494,638 ----------- ----------- Investments Time deposits in foreign currency 70,310,396 - 3.109 218,595,022 - - Mutual funds in foering currency 366 - 3.109 1,138 71,163,688 215,056,665 Special deposit account in foreign currency 74,299,423 - 3.109 230,996,906 - - Accounts receivable Domestic 116,860,806 - 3.109 363,320,247 106,460,311 321,723,060 Foreign 7,697,427 - 3.109 23,931,302 387,251,549 119,506,796 361,149,538 682,872,598 ----------- ----------- Allowances for bad debtors - - - - ( 4,642,574) ( 14,029,859) Other receivables Expenses recoverable - foreign 618,626 - 3.109 1,923,308 425,037 1,284,463 Miscellaneous - domestic 435,222 - 3.109 1,353,106 2,675,304 8,084,768 Miscellaneous - foreign 2,612,750 - 3.109 8,123,039 9,476,145 6,600,871 19,947,831 28,032,599 ----------- ----------- Foreign affiliated companies 735,516 - 3.109 2,286,719 132,125 399,282 Inventories Advances to suppliers - foreign 184,212 - 3.109 572,715 93,245 - 281,786 Total current assets 273,865,563 4,370 851,468,019 305,627,888 4,370 923,624,894 ----------- ----- ----------- ------------ ----- ------------- NON CURRENT ASSETS Other receivables Miscellaneous - domestic 4,601,062 - 3.109 14,304,701 4,641,053 - 14,025,263 ----------- ----- ----------- ------------ ----- ------------- Total non current assets 4,601,062 - 14,304,701 4,641,053 - 14,025,263 ----------- ----- ----------- ------------ ----- ------------- Total assets 278,466,625 4,370 865,772,720 310,268,941 4,370 937,650,157 =========== ===== =========== ============ ===== ============= US$ = United States dollars (1) As per buyer exchange rate as of December 31, 2007. (2) As per buyer exchange rate as of December 31, 2006. EXHIBIT F (Cont.) ASSETS AND LIABILITIES IN FOREIGN CURRENCY as of December 31, 2007 and as of December 31, 2006 Amount and type Amount Amount and Amount in of Exchange in local type local foreign currency currency as of foreign currency as of currency of Item as of rate as of 12/31/2007 12/31/2007 12/31/2006 12/31/2006 -------------------------- ---------------- -------- ------------- ------------- ------------- ----------- ------------- US$ $ (1) (1) US$ (2) (2) LIABILITIES CURRENT LIABILITIES Accounts payable Trade - domestic 48,454,730 3.149 152,583,946 37,552,721 114,986,434 Trade - foreign 2,260,353 3.149 7,117,852 159,701,798 17,072,909 52,277,247 167,263,681 ------------- ----------- Affiliated companies - domestic 1,039,475 3.149 3,273,306 2,965,550 9,080,512 Affiliated companies - foreign 606,618 3.149 1,910,240 5,183,546 292,913 896,899 9,977,411 ------------- ----------- Loans Bonds - Foreign - - - - 100,000,000 306,200,000 Secured notes payable - Foreign - - - - 1,362,702 4,172,593 Unsecured notes payable - domestic 82,000,000 3.149 258,218,000 25,000,000 76,550,000 - Unsecured notes payable - Foreign 46,818,827 3.149 147,432,487 405,650,487 48,842,446 149,555,569 226,105,569 Interest accrued on bonds and notes payable 24,081,660 3.149 75,833,146 21,386,973 65,486,912 ---------------- ------------- ------------- ------------- Total current liabilities 205,261,663 646,368,977 254,476,214 779,206,166 ---------------- ------------- ------------- ------------- NON CURRENT LIABILITIES Accounts payable Miscellaneous liabilities - foreign 5,510,148 3.149 17,351,455 5,510,148 16,872,072 Loans Bonds - foreign 350,000,000 3.149 1,102,150,000 350,000,000 1,071,700,000 Unsecured notes payable - domestic 15,000,000 3.149 47,235,000 - - - Unsecured notes payable - foreign 582,780,000 3.149 1,835,174,219 1,882,409,219 244,034,550 747,233,793 747,233,793 ---------------- ------------- ------------- ------------- ----------- ------------- Total non current liabilities 953,290,148 3,001,910,674 599,544,698 1,835,805,865 ---------------- ------------- ------------- ------------- Total liabilities 1,158,551,811 3,648,279,651 854,020,912 2,615,012,031 ================ ============= ============= ============= US$ = United States dollars (1) As per seller exchange rate as of December 31, 2007. (2) As per seller exchange rate as of December 31, 2006. EXHIBIT G INFORMATION REQUIRED BY ART. 64, CLAUSE 1b) OF LAW 19550, for the fiscal year beginning January 1, 2007 and ended December 31, 2007, comparative with the prior fiscal year (in pesos) Production Administrative Items costs expenses Total 2007 Total 2006 ---------------------------------------- ------------- ----------------- --------------- -------------- Fees and compensation for services 22,231,589 20,389,108 42,620,697 29,213,286 Salaries, wages and benefits to personnel 159,786,066 47,148,062 206,934,128 137,849,967 Defined benefit plans to personnel (Note 3.2.j) 12,701,813 9,815,236 22,517,049 21,150,418 Social security contributions 17,086,164 8,217,102 25,303,266 19,374,470 Taxes, assessments and other contributions 839,386,187 129,934,957 969,321,144 864,819,051 Depreciation of property, plant and equipment (Exhibit A) 761,688,344 7,435,347 769,123,691 638,177,818 Intangible asset amortization (Exhibit B) 1,528,298 - 1,528,298 2,215,059 Transportation, freight and storage expenses 109,165,788 62,785 109,228,573 90,817,237 Contracted services 386,550,013 16,071,961 402,621,974 407,390,908 Travel and accommodation expenses 8,871,492 7,234,017 16,105,509 12,548,784 Building rentals and maintenance 22,163,264 12,857,005 35,020,269 33,367,588 Environmental remediation and rights of way 41,795,578 - 41,795,578 21,391,465 Bad debtors (Exhibit D) - 5,903,164 5,903,164 3,550,367 Lawsuits 414,439 746,126 (1) 1,160,565 3,913,284 Obsolescence of materials (Exhibit D) 445,288 - 445,288 502,300 Production, exploration and administrative general expenses 151,498,723 279,526 151,778,249 99,349,329 ------------- ----------------- --------------- -------------- Total 2007 2,535,313,046 266,094,396 2,801,407,442 ============= ================= =============== Total 2006 2,159,201,877 226,429,454 2,385,631,331 ============= ================= ============== (1) Exhibit D EXHIBIT H Balance sheet as of December 31, 2007 and as of December 31, 2006 TERMS, INTEREST RATES AND ADJUSTMENT CLAUSES OF SHORT-TERM INVESTMENTS, LOANS, RECEIVABLES AND PAYABLES (in pesos) Investments Receivables Payables ------------------------------ ------------------------------ ---------------------------- 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 ------------- ---------------- --------------- -------------- ------------- -------------- Total amount without an established term 1,260,987 (1) 1,704,494 101,806,117 (3) 61,217,175 664,952,181 703,702,130 To become due: Up to 3 months 450,344,176 215,056,665 515,078,238 821,770,799 754,732,049 746,810,041 From 3 to 6 months - - 1,718,540 1,780,744 174,757,551 391,765,651 From 6 to 9 months 670,023 - 1,674,756 1,087,619 615,436 492,102 From 9 to 12 months 79,278 - 1,610,016 697,929 30,986,936 22,356,302 From 1 to 2 years 1,340,047 - 5,651,924 2,814,716 229,339 215,609 From 2 to 3 years 1,340,046 - 3,793,343 903,215 - - From 3 to 4 years - - 1,574,957 491,328 - - From 4 to 5 years - - 848,516 332,877 - - From 5 to 6 years - - 382,649 59,678 - - 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 5,592,766 (2) 7,015,064 (2) - - - - ------------- ---------------- --------------- -------------- ------------- -------------- Subtotal 460,627,323 223,776,223 634,139,056 891,156,080 1,626,273,492 1,865,341,835 Other items that are not to be collected or paid in cash - - 15,541,887 12,183,347 - - ------------- ---------------- --------------- -------------- ------------- -------------- Total 460,627,323 223,776,223 649,680,943 903,339,427 1,626,273,492 1,865,341,835 ============= ================ =============== ============== ============= ============== Loans ---------------------------------------- 12/31/2007 12/31/2006 ---------------------- ----------------- Total amount without an established term - - To become due: Up to 3 months 566,991,809 793,674,710 From 3 to 6 months 123,035,173 12,719,548 From 6 to 9 months 55,280,695 59,108,848 From 9 to 12 months - 11,519,244 From 1 to 2 years 655,218,728 614,032,179 From 2 to 3 years 293,083,728 420,959,321 From 3 to 4 years 686,708,728 111,306,762 From 4 to 5 years 686,708,728 485,663,820 From 5 to 6 years 222,237,526 485,663,820 From 6 to 7 years 189,236,006 34,018,820 From 7 to 8 years 113,722,986 34,018,820 From 8 to 9 years 83,398,116 34,049,440 From 9 to 10 years 36,163,116 45,930,000 From 10 to 11 years 18,081,557 - Over 11 years - - ---------------------- ----------------- Subtotal 3,729,866,896 3,142,665,332 Other items that are not to be collected or paid in cash - - ---------------------- ----------------- Total 3,729,866,896 3,142,665,332 ====================== ================= (1) It includes $ 1,258,987 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. EXHIBIT H Balance sheet as of December 31, 2007 and as of December 31, 2006 (Cont.) TERMS, INTEREST RATES AND ADJUSTMENT CLAUSES OF SHORT-TERM INVESTMENTS, LOANS, RECEIVABLES AND PAYABLES (in pesos) Investments Receivables Payables --------------------------------- --------------------------------- ------------------------------------- 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 ---------------- ---------------- ---------------- ---------------- ------------------ ------------------ Rate Pesos Rate Pesos 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$ - - - - - - - - - - - - Annual fixed rate in US$ - - - - - - - - - - - - Annual fixed rate in US$ - - - - - - 8.00 2,362,909 - - - - CER plus annual fixed rate in $ 4.00 4,180,504 - - - - - - - - - - Average annual variable rate in $ - - - - 8.00 15,196,646 8.00 7,906,016 - - - - Average annual variable rate in $ - - - - - - - - - - - Annual fixed rate in US$ - - - - 8.50 1,654,064 8.50 1,079,127 - - - - Average annual variable rate in US$ - - - - - - - - - - - - Average annual fixed rate in US$ - - - - - - - - - - - - Average annual variable rate in US$ 4.62 449,593,066 5.26 215,056,665 4.50 14,286 4.50 28,574 - - - - Annual fixed rate in $ plus CER 5.83 5,592,766 5.83 7,015,064 - - - - - - - - Non- interest bearing 1,260,987 1,704,494 632,815,947 891,962,801 1,626,273,492 1,865,341,835 ----------- ----------- ----------- ----------- ------------- ------------- Total 460,627,323 223,776,223 649,680,943 903,339,427 1,626,273,492 1,865,341,835 =========== =========== =========== =========== ============= ============= Loans -------------------------------------------------- 12/31/2007 12/31/2006 -------------------------- ----------------------- Rate Pesos Rate Pesos -------- ----------------- ----- ----------------- Annual fixed rate in US$ - - 6.75 306,200,000 Annual fixed rate in US$ 7.125 314,900,000 7.125 306,200,000 Annual fixed rate in US$ - - 7.00 4,172,594 Annual fixed rate in US$ 5.45 1,887,731 5.45 5,565,507 Annual fixed rate in US$ 6.18 64,199 6.18 187,272 Annual fixed rate in US$ 7.56 279,914,610 7.56 306,200,000 Annual fixed rate in US$ 6.97 354,262,500 6.97 413,370,000 Annual fixed rate in US$ 5.66 (2) 47,235,000 5.66 45,930,000 Annual fixed rate in US$ 8.00 31,490,000 8.00 30,620,000 Annual fixed rate in US$ 7.75 787,250,000 7.75 765,500,000 CER plus annual fixed rate in $ - - - - Average annual variable rate in $ 9.83 263,824,044 7.78 275,057,276 Average annual variable rate in $ - - 10.25 446,709,189 Annual fixed rate in US$ - - - - Average annual variable rate in US$ 7.14 1,267,752,666 6.48 94,916,582 Average annual fixed rate in US$ 5.76 305,453,000 5.00 76,550,000 Average annual variable rate in US$ - - - - Annual fixed rate in $ plus CER - - - - Non-interest bearing - - - ----------------- ----------------- Total 3,654,033,750 (1) 3,077,178,420 (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 Balance sheet as of December 31, 2007 and as of December 31, 2006 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% 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- ASSETS ------------ CURRENT ASSETS ------------ Cash on hand and in banks 6,737 8,006 162,872 132,325 21,005 46,796 115,536 681,589 28,033 Other receivables 1,022,484 885,345 9,917,410 1,608,315 5,035,286 27,819 611,434 2,503,876 1,171,815 Inventories 6,518,514 5,608,560 9,565,286 10,779,553 9,049,887 8,325,385 2,697,006 1,881,612 80,115 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- Total current assets 7,547,735 6,501,911 19,645,568 12,520,193 14,106,178 8,400,000 3,423,976 5,067,077 1,279,963 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- NON CURRENT ASSETS ------------ Property, plant and equipment 132,339,618 100,752,309 253,948,755 210,261,214 189,303,216 211,498,427 673,640,204 599,158,484 5,587,925 Intangible assets - - - 8,059 - - - - 2,628 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- Total non current assets 132,339,618 100,752,309 253,948,755 210,269,273 189,303,216 211,498,427 673,640,204 599,158,484 5,590,553 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ---------- Total assets 139,887,353 107,254,220 273,594,323 222,789,466 203,409,394 219,898,427 677,064,180 604,225,561 6,870,516 =========== =========== =========== =========== =========== =========== =========== =========== ========== 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% 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ASSETS ------------ CURRENT ASSETS ------------ Cash on hand and in banks 1,384 68,531 88,614 - - - - - 1,644 Other receivables 395,342 8,948 31,301 63,424 65,562 29,265 29,264 911,323 1,087,844 Inventories 76,352 - - - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total current assets 473,078 77,479 119,915 63,424 65,562 29,265 29,264 911,323 1,089,488 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NON CURRENT ASSETS ------------ Property, plant and equipment 5,090,205 2,117,425 4,519,810 13,835,541 11,175,237 1,113,741 588,337 3,820,656 2,262,167 Intangible assets 210,418 - - - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total non current assets 5,300,623 2,117,425 4,519,810 13,835,541 11,175,237 1,113,741 588,337 3,820,656 2,262,167 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total assets 5,773,701 2,194,904 4,639,725 13,898,965 11,240,799 1,143,006 617,601 4,731,979 3,351,655 ========== ========== ========== ========== ========== ========== ========== ========== ========== EXHIBIT I (Cont.) Balance sheet as of December 31, 2007 and as of December 31, 2006 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% 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- LIABILITIES --------------- CURRENT LIABILITIES --------------- Accounts payable 3,747,969 3,103,235 44,692,923 39,892,511 14,300,600 14,087,777 31,815,503 71,445,119 Payroll and social security contributions 754,526 500,717 - - - - 659,944 574,386 Taxes payable 123,464 85,849 215 - - 307,032 275,367 899,221 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total current liabilities 4,625,959 3,689,801 44,693,138 39,892,511 14,300,600 14,394,809 32,750,814 72,918,726 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- NON CURRENT LIABILITIES ----------------- Accounts payable 3,261,912 2,036,355 219,132 219,132 876,528 876,528 1,741,273 1,521,884 Provision for environmental remediation 10,608,086 9,177,151 6,401,074 3,737,323 8,873,866 7,186,139 3,459,737 2,928,406 Accruals 6,147,461 5,137,832 76,201 365,027 436,293 325,076 2,458,378 2,098,309 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total non current liabilities 20,017,459 16,351,338 6,696,407 4,321,482 10,186,687 8,387,743 7,659,388 6,548,599 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total liabilities 24,643,418 20,041,139 51,389,545 44,213,993 24,487,287 22,782,552 40,410,202 79,467,325 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Owner's equity 115,243,935 87,213,081 222,204,778 178,575,473 178,922,107 197,115,875 636,653,978 524,758,236 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total 139,887,353 107,254,220 273,594,323 222,789,466 203,409,394 219,898,427 677,064,180 604,225,561 =========== =========== =========== =========== =========== =========== =========== =========== Costa Costa Costa Costa Afuera Afuera Afuera Afuera Estancia Estancia Argentina Argentina Argentina Argentina Anticlinal La La Escondida Escondida Bandurria Bandurria Bloque 40 Bloque 40 Bloque 46 Bloque 46 Funes 25,00% 25,00% 18,18% 18,18% 50,00% 50,00% 50,00% 50,00% 80,00% 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 12/31/2006 12/31/2007 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- LIABILITIES --------------- CURRENT LIABILITIES --------------- Accounts payable 1,201,226 250,581 509,626 823,060 - - - 13,283 1,078,756 Payroll and social security contributions - - - - - - - - 6,711 Taxes payable 111,921 95,443 6,793 - - - - - 2,654 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total current liabilities 1,313,147 346,024 516,419 823,060 - - - 13,283 1,088,121 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- NON CURRENT LIABILITIES ----------------- Accounts payable - - - - - - Provision for environmental remediation 83,641 92,200 - - - - - 551,850 Accruals - - - - - - - - - ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total non current liabilities 83,641 92,200 - - - - - - 551,850 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total liabilities 1,396,788 438,224 516,419 823,060 - - - 13,283 1,639,971 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Owner's equity 5,473,728 5,335,477 1,678,485 3,816,665 13,898,965 11,240,799 1,143,006 604,318 3,092,008 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total 6,870,516 5,773,701 2,194,904 4,639,725 13,898,965 11,240,799 1,143,006 617,601 4,731,979 ========== ========== ========== ========== ========== ========== ========== ========== ========== Anticlinal Funes 80,00% 12/31/2006 ---------- LIABILITIES --------------- CURRENT LIABILITIES --------------- Accounts payable 1,376,434 Payroll and social security contributions 1,928 Taxes payable 10,000 ---------- Total current liabilities 1,388,362 ---------- NON CURRENT LIABILITIES ----------------- Accounts payable - Provision for environmental remediation 972,617 Accruals - ---------- Total non current liabilities 972,617 ---------- Total liabilities 2,360,979 ---------- Owner's equity 990,676 ---------- Total 3,351,655 ========== EXHIBIT I (Cont.) Statement of income for the fiscal year ended December 31, 2007, comparative with the prior fiscal year PARTICIPATION IN JOINT VENTURES (in pesos) Lindero Lindero Aguada Aguada San San Atravesado Atravesado Pichana Pichana Roque Roque Acambuco 62,50% 62,50% 18,18% 18,18% 16,47% 16,47% 52,00% 2007 2006 2007 2006 2007 2006 2007 ------------ ------------ ------------- ------------ ------------- ------------ ------------- Sales (1) - - - - - - - Cost of sales (55,567,051) (48,257,651) (125,013,861) (85,070,429) (115,433,002) (47,786,864) (172,199,123) ------------ ------------ ------------- ------------ ------------- ------------ ------------- Gross result (55,567,051) (48,257,651) (125,013,861) (85,070,429) (115,433,002) (47,786,864) (172,199,123) Administrative expenses - - - - - - - ------------ ------------ ------------- ------------ ------------- ------------ ------------- Operating result (55,567,051) (48,257,651) (125,013,861) (85,070,429) (115,433,002) (47,786,864) (172,199,123) Financial results - net ( 607,411) ( 484,699) ( 214,864) ( 148,551) ( 413,880) ( 340,800) 37,110 Other income and expenses - Net 702,842 ( 2,801,292) 4,874,844 ( 50,634) 371,953 ( 435,176) 972,859 ------------ ------------ ------------- ------------ ------------- ------------ ------------- Net results (55,471,620) (51,543,642) (120,353,881) (85,269,614) (115,474,929) (48,562,840) (171,189,154) ============ ============ ============= ============ ============= ============ ============= Estancia Estancia La La Acambuco Escondida Escondida Bandurria Bandurria 52,00% 25,00% 25,00% 18,18% 18,18%% 2006 2007 2006 2007 2006 -------------------------- ----------- ----------- ----------- --------- Sales (1) - - - - - Cost of sales (148,797,239) (3,369,612) (4,849,585) - - -------------------------- ----------- ----------- ----------- --------- Gross result (148,797,239) (3,369,612) (4,849,585) - - Administrative expenses - - - - - -------------------------- ----------- ----------- ----------- --------- Operating result (148,797,239) (3,369,612) (4,849,585) - Financial results - net ( 246,753) 19,189 ( 17,359) ( 2,315) ( 1,994) Other income and expenses - Net ( 534,930) - - (3,054,904) (768,580) -------------------------- ----------- ----------- ----------- --------- Net results (149,578,922) (3,350,423) (4,866,944) (3,057,219) (770,574) ========================== =========== =========== =========== ========= Costa Costa Costa Costa Afuera Afuera Afuera Afuera Argentina Argentina Argentina Argentina Anticlinal Anticlinal Bloque 40 Bloque 46 Bloque 46 Bloque 46 Funes Funes 50,00% 35,00% 50,00% 35,00% 80,00% 80,00% 2007 2006 2007 2006 2007 2006 --------- ----------- --------- ----------- ----------- ------------ Sales (1) - - - - - - Cost of sales - - - - (8,619,219) (14,246,684) --------- ----------- --------- ----------- ----------- ------------ Gross result (8,619,219) (14,246,684) Administrative expenses - - - - - - --------- ----------- --------- ----------- ----------- ------------ Operating result - - - (8,619,219) (14,246,684) Financial results - net - - - - 142,344 ( 52,968) Other income and expenses - Net (567,667) (4,327,370) (732,684) (3,563,307) 6 ( 101) --------- ----------- --------- ----------- ----------- ------------ Net results (567,667) (4,327,370) (732,684) (3,563,307) (8,476,869) (14,299,753) ========= =========== ========= =========== =========== ============ (1) No sales were recorded in the joint ventures because production is directly assigned to each participant. FINANCIAL STATEMENTS as of December 31, 2007 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 fiscal year 2007, with a daily average production of 219.6 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 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 issueance 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. 1.3. Loan agreements Pan American Energy LLC (Argentine Branch) obtained the following loans at a five-year term, with interest compounded bi-annually amortized in monthly installments: 1) On July 20, 2001, in the amount of US$ 72,051,406, with interest accruing at an annual rate of 7.54%, with the first installment falling due on April 19, 2002 and the repayment term being completed on June 20, 2006, and 2) on September 17, 2001, in the amount of US$ 40,001,944, with interest accruing at an annual rate of 6.72%, with the first installment falling due on June 20, 2002 and completing repayment on August 21, 2006. For the purpose of fixing the interest rate, the Branch entered into integrated derivative transactions, the impact of which has been included in the cost of the transactions. Both loans were guaranteed by Pan American Energy LLC until the repayment thereof in June and August 2006. 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 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 half yearly basis and becoming due in April 2018; and - "B", sub-tranch "1" in the amount of US$ 158,500,000, amortizable on a half yearly basis and becoming due in April 2014, and "B" sub-tranch "2" in the amount of US$ 241,500,000, amortizable on a half yearly 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 Dragón area in 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. The remaining U$S 150,000,000 was disbursed in January 2008. 2. Balance sheet items as of December 31, 2007 (in pesos) Balance sheet Balance sheet Balance sheet Balance sheet Balance sheet as of as of as of as of as of 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 --------------- --------------- --------------- --------------- --------------- Current assets 1,260,904,810 1,235,627,955 1,193,228,984 659,203,025 508,446,665 Non current assets 7,446,314,957 5,910,041,926 4,879,105,847 4,198,334,101 3,928,552,138 --------------- --------------- --------------- --------------- --------------- Total 8,707,219,767 7,145,669,881 6,072,334,831 4,857,537,126 4,436,998,803 =============== =============== =============== =============== =============== Current liabilities 1,706,399,649 2,038,446,446 1,384,514,484 1,416,818,735 1,193,557,856 Non current liabilities 3,669,958,237 2,989,464,507 2,164,983,591 1,367,102,560 1,561,029,726 --------------- --------------- --------------- --------------- --------------- Subtotal 5,376,357,886 5,027,910,953 3,549,498,075 2,783,921,295 2,754,587,582 --------------- --------------- --------------- --------------- --------------- Account with Head Office 2,869,622,874 1,656,519,921 2,061,597,749 1,634,155,831 1,242,951,221 Capital allocated to the Branch 221,779,007 221,779,007 221,779,007 200,000,000 200,000,000 Capital adjustment 239,460,000 239,460,000 239,460,000 239,460,000 239,460,000 --------------- --------------- --------------- --------------- --------------- Total 8,707,219,767 7,145,669,881 6,072,334,831 4,857,537,126 4,436,998,803 =============== =============== =============== =============== =============== 3. Income statement items as of December 31, 2007 (in pesos) Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year ended ended ended ended ended 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 -------------- -------------- -------------- -------------- ------------- Ordinary operating income 2,573,221,966 2,743,659,781 1,892,940,989 1,345,594,475 962,439,720 Financial results ( 334,318,829) ( 157,229,580) ( 111,002,384) ( 162,139,929) (278,812,283) Other income and expenses - net ( 24,199,544) ( 41,522,382) ( 100,766,855) ( 95,409,580) ( 89,107,077) -------------- -------------- -------------- -------------- ------------- Income before taxes 2,214,703,593 2,544,907,819 1,681,171,750 1,088,044,966 594,520,360 Income tax/minimum deemed income tax ( 831,214,623) ( 896,407,452) ( 609,797,133) ( 409,943,143) (248,894,158) Deferred tax 52,253,813 ( 3,463,245) 14,847,018 86,414,740 161,016,474 -------------- -------------- -------------- -------------- ------------- Net income 1,435,742,783 1,645,037,122 1,086,221,635 764,516,563 506,642,676 ============== ============== ============== ============== ============= 4. Statistical data Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year ended ended ended ended ended 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 ------------------ ----------------- ----------------- ------------------ ----------------- In cubic meters In cubic meters In cubic meters In cubic meters In cubic meters ------------------ ----------------- ----------------- ------------------ ----------------- Production of crude oil 6,150,764 6,123,609 5,899,233 5,721,813 5,279,853 Sale of crude oil 6,135,234 6,146,250 5,688,359 5,534,021 5,289,407 In thousand cubic In thousand cubic In thousand cubic In thousand cubic In thousand cubic meters meters meters meters meters ------------------ ----------------- ----------------- ------------------ ----------------- Production of natural gas 5,229,944 4,887,081 4,447,626 4,187,349 3,411,061 Sale of natural gas 5,310,947 4,777,025 4,457,984 3,972,402 3,149,750 Transportation of natural gas 2,756 15,159 307,242 358,903 281,921 In tons In tons In tons In tons In tons ------------------ ----------------- ----------------- ------------------ ----------------- Production of L.P.G. 75,337 104,647 66,910 64,577 58,940 Sale of L.P.G. 62,342 105,810 60,480 69,597 72,585 5. Ratios Financial Financial Financial Financial Financial statements statements statements statements statements as of as of as of as of as of 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 ------------- -------------- -------------- -------------- -------------- Liquidity 0.74 0.61 0.86 0.47 0.43 Indebtedness 1.60 2.37 1.41 1.34 1.64 Tied -up funds 0.86 0.83 0.80 0.86 0.89 Solvency 0.62 0.42 0.71 0.74 0.61 Return before income tax / minimum deemed income tax 1.05 1.01 0.81 0.65 0.34 Net return 0.68 0.65 0.52 0.45 0.29 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 fiscal year 2007, the Branch's oil production grew by 0.4% and natural gas production rose by 7.0% with respect to 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 fiscal year 2007, the GDP grew by 8.7% compared with the prior fiscal year, which indicates that a growing trend - initiated 23 quarters ago - continues. It is estimated that the gross domestic product GDP will continue growing in a sustainable way in 2008. The unemployment rate is about 7.5%. The Federal Government exceeded the primary fiscal surplus expected for 2007 by 22%, reaching a primary fiscal surplus of 25,670 million pesos, up 10.8% with respect to the prior fiscal year. The level of foreign indebtedness as of September 30, 2007 increased with respect to the same date of the prior fiscal year and amounted to US$ 137,114 million. The country's international reserves amounted US$ 46,176 million as of December 31, 2007, 44.1% 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 $ 60.9 / barrel. The fourth quarter and fiscal year 2007 results fully 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 shall 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, through Resolution No. 534/2006, increased them to US$ 2,25 per million BTU. On June 29, 2006, the Federal Government signed a form contract with the Republic of Bolivia to import gas from such country. In October 2006, ENARSA and Yacimientos Petrolíferos Fiscales Bolivianos agreed on the sale of Bolivian natural gas having established an initial price of US$ 5 per million of BTU with a maximum daily volume of 7.7 million cubic meters up to a maximum daily volume of 27.7 million cubic meters in year 2010. This contract provides for an extension of one year. The volume proposed for 2010/2011 will be obtained once the gas pipeline named Noreste Argentino is built and the increase required in the gas production capacity of Bolivia is ensured. During the last months, the gas availability by Bolivia was not enough to meet the supply commitment assumed with Argentina. During 2007, the various unions gathering workers who perform tasks in the oil fields operated by the Branch made claims for a salary increase and other labor benefits. In the first half of the year, such claims were peacefully made and, as a result, no action measures affecting operations were taken. Nonetheless, in July, the unions took direct action measures which affected production and operations in our oil fields. During fiscal year 2007, 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 Nr. 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 Dragón, 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. These investments are to be made before 2017 and are destined to onshore activities. Other investments of US$ 1,000,000,000 in the Province of Chubut and of 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 offshore exploration, at the Branch's own risk, by means of two joint ventures (UTEs) with the companies Petrominera (owned by the province Chubut) and Fomicruz (owned by the province 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 Hydrocarbons 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, and will be enforced as from the year 2027, subject to compliance with the investments and Pan American Energy's exploration success, in that it will have developed sufficient reserves to continue with the production of the fields of those areas as from that year. 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 Government of the Province of Santa Cruz has sent the agreement to the Provincial Congress for its approval, which is pending. 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 shall allow addressing long-term projects requiring sound investments, new technologies and teams working for the future. Pan American Energy, based on its exploration activities in Cerro Dragón block, has been able to find new oil and natural gas reserves, which were identified in the Northern and Central areas of such block, in the Province of Chubut, totaling one hundred million barrels of oil equivalent. On October 28, 2007, the presidential, and other governmental authorities elections took place in the country. Thus, the elections schedule that started several months ago in different provinces of the country was completed. These elections proved to be a new milestone in the history of the country's democracy and support the democratic and institutional regularization process that started 24 years ago. The new administration is expected to maintain the current policies in terms of hydrocarbon exploration and production. Buenos Aires, March 7, 2008 Daniel Grinstein Attorney in-fact FINANCIAL STATEMENTS as of December 31, 2007 SUPPLEMENTARY INFORMATION TO THE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2007 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 December 31, 2007. 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 October to December 2007 7,095,134 Due from July to September 2007 24,600,701 Due from April to June 2007 4,516,657 Due from January to March 2007 2,311,832 Due from January to December 2006 16,947,546 Due from January to December 2005 2,963,901 Due from January to December 2004 654,292 Due from January to December 2003 1,903,688 Due from January to December 2002 1,054,721 Due from January to December 2001 183,996 Due from January to December 2000 63,348 ---------------------- Total 62,295,816 ====================== 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 December 31, 2006, 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 December 31, 2007 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 December 31, 2007, the insurance taken on the Branch's assets are as follows: Covered 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 December 31, 2007. None. Irrevocable advances for future subscriptions 14. As of December 31, 2007 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, March 7, 2008 Daniel Grinstein Attorney in-fact Translation from the original prepared in Spanish for publication in Argentina
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