Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. APCO OIL & GAS INTERNATIONAL INC (311471) 10-Q published on Nov 04, 2014 at 4:29 pm
Reporting Period: Sep 29, 2014
The increase in Petrolera’s net income for the three months ended September 30, 2014, compared with the same period of 2013 is primarily a result of greater revenues partially offset by higher depreciation, depletion and amortization expense and greater foreign exchange losses. The decrease in Petrolera’s net income for the nine months ended September 30, 2014, compared with the same period of 2013 is primarily a result of higher depreciation, depletion and amortization expense and greater foreign exchange losses. Petrolera declared a dividend of $36.7 million pesos net to Apco (approximately $4.4 million U.S. dollars during third quarter 2014. The payment of this third quarter dividend was pending Central Bank and AFIP (Argentina's tax authority) approval per exchange control restrictions as of the end of the quarter, and was recorded as a dividend receivable in our other current assets accordingly. During the nine months ended September 30, 2014 and 2013, Petrolera declared dividends of $60.9 million pesos net to Apco (approximately $7.4 million U.S. dollars) and $16.4 million pesos net to Apco (approximately $3.3 million U.S. dollars) respectively.
The Merger Agreement contains certain termination rights for both Apco and Parent including, among others, (i) by Apco, in the event Apco enters into a definitive agreement with respect to a Superior Offer, and (ii) by Parent, if, at any time prior to the approval by Apco’s shareholders, there has been an Adverse Recommendation Change. Upon termination of the Merger Agreement under specific circumstances, Apco will be required to pay Parent a termination fee equal to $15.5 million. Among other things, if the Merger Agreement is terminated in connection with Apco entering into a definitive agreement with respect to a Superior Offer, Apco is required to pay to Parent the termination fee immediately prior to or concurrently with termination of the Merger Agreement. In addition to the foregoing termination rights, either party may terminate the Merger Agreement if the Merger is not consummated on or before July 2, 2015.
In connection with the proposed Merger and required shareholder approval, Apco filed a preliminary proxy statement with the U.S. Securities and Exchange Commission (the “SEC”) and will deliver a definitive proxy statement to its shareholders. We plan to complete the Merger promptly after our shareholders approve and adopt the Merger Agreement at an extraordinary general meeting and after the satisfaction or waiver of all other conditions to the Merger. We currently anticipate that the Merger will be completed in the fourth quarter of 2014. However, there can be no assurances that the Merger will be completed at all or, if completed, that it will be completed in the fourth quarter.
Apco has agreed, among other things, (i) not to initiate, solicit or knowingly encourage or knowingly facilitate alternative acquisition proposals or inquiries relating to alternative acquisition proposals from third parties and (ii) other than informing third parties of the existence of the non-solicitation provisions of the Merger Agreement, not to engage in any negotiations or discussions with, or furnish non-public information, to any third party who has made or in response to an alternative acquisition proposal or an inquiry relating to an alternative acquisition proposal. Apco is permitted substantially contemporaneously with the public announcement of the Merger Agreement to waive the “don’t ask/don’t waive” provisions of any standstill provision contained in any confidentiality agreement in effect as of October 2, 2014 but is obligated to disclose to Parent the identity of any party receiving the benefit of such waiver.
The consummation of the Merger is subject to the satisfaction or waiver of certain customary conditions, including, among others: (i) the absence of certain legal impediments to the consummation of the Merger, (ii) the adoption of the plan of merger by the shareholders of Apco holding two-thirds or more of the Company Shares, (iii) the absence of a material adverse effect on Apco since the date of the Merger Agreement and (iv) the consummation of certain transactions pursuant to the Irrevocable Offer, dated October 2, 2014, from Parent to WPX Energy, Inc., a Delaware corporation and the majority shareholder of Apco(“WPX”), pursuant to which WPX has agreed to sell its interests in Apco Argentina, S.A. and Northwest Argentina Corporation to Parent. In connection with Apco and Parent entering into the Merger Agreement, WPX, holding 69 percent of the Company Shares, has entered into a power of attorney, which among other things, grants to a designee of Parent the power to vote WPX’s Class A shares in Apco in favor of the approval and adoption of the plan of merger unless the Merger Agreement is terminated pursuant to its terms.
The Merger Agreement contains customary representations, warranties and covenants for a transaction of this nature. The Merger Agreement also contains customary pre-closing covenants, including the obligation of Apco to conduct its business in the ordinary course and to refrain from taking certain specified actions without the consent of Parent.
We have agreed in our Merger Agreement with Pluspetrol that, among other things, we will not engage in certain kinds of transactions during the interim period between the execution of the Merger Agreement and the consummation of the Merger, including limitations on our ability to incur debt, issue securities and sell or acquire material assets. If we seek to engage in a restricted activity under these covenants, we are required to obtain the prior consent of Pluspetrol. We do not anticipate that these contractual limitations will adversely affect our ability to satisfy our liquidity needs during this interim period. We expect that cash generated from operating activities, including expected increases in cash flows from our Colombian operations, and cash on hand will be sufficient for the remainder of 2014 and to cover our operating and capital spending requirements. Our total capital expenditures are currently estimated to be approximately $90 million in 2014. In the fourth quarter of 2014, we anticipate spending approximately $30 million for remaining development and exploration activities planned for the year. As of September 30, 2014, our cash and cash equivalents balance was $24.8 million.