311471--3/10/2006--APCO_ARGENTINA

related topics

{gas, price, oil}

{regulation, change, law}

{operation, international, foreign}

{operation, natural, condition}

{cost, regulation, environmental}

{cost, contract, operation}

{financial, litigation, operation}

{cost, operation, labor}

{property, intellectual, protect}

{acquisition, growth, future}

{investment, property, distribution}

Historic performance of the Company s exploration and production program is no guarantee of future performance. The Company s drilling, production, gathering, processing, and transporting activities involve numerous risks that might result in accidents and other operating risks and costs. Costs of environmental liabilities and complying with existing and future environmental regulations could exceed the Company s current expectations. Because of the natural decline in production from existing wells, the Company s future success depends on its ability to obtain and successfully develop new reserves. The Company has observed a reduction in the availability of drillings rigs in recent months. The Company s oil sales have historically depended on a relatively small group of customers. The lack of competition for buyers could result in unfavorable sales terms which, in turn, could adversely affect the Company s financial results. The Company is not the operator of all its hydrocarbon interests. The reliance on others to operate these interests could adversely affect the Company s business and operating results. Changes in, and volatility of, supply, demand, and prices for crude oil, natural gas and other hydrocarbons has a significant impact on the Company s ability to generate earnings, fund capital requirements, and pay shareholder dividends Risks Associated with Operations in Argentina The right of the Company to explore for, drill for, and produce hydrocarbons in Argentina are generally derived from participation in concessions granted by the Argentine government, which have a finite term, the expiration or termination of which could materially affect the Company s results. Argentina has a recent history of economic instability. Because the Company s operations are exclusively located in Argentina, its operations and financial results have been, and could be in the future, adversely affected by economic, market, currency, and political instability in the country as well as measures taken by the government in response to such instability. Strikes, work stoppages, and protests could increase the Company s operating costs, hinder operations, reduce cash flow, and delay growth projects. Price reduction formulas in agreements to sell crude oil to refiners reduce considerably the increases in the sale price net back to the Company as the price of crude oil increases. Consequently, recent sharp increases in oil prices have benefited oil producers outside of Argentina more than the Company. Risks Related to Regulations that Affect the Company s Business The cost and outcome of legal and administrative claims and proceedings against the Company and its subsidiaries could adversely affect the Company s results and operations. Changes in Argentine laws and regulations to which the Company is subject, including tax, environmental and employment laws, and regulations, could have a material affect on its operations and results. Risks Related to Accounting Standards Potential changes in accounting standards might cause the Company to revise its financial results and disclosure in the future, which might change the way analysts measure the Company s business or financial performance. If the terms of the concessions in which the Company participates are extended, for an additional ten-year period, asset retirement obligations provided for by the Company under current concession terms could be greater than currently estimated. Institutional knowledge residing with current employees might not be adequately preserved.

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311471--3/10/2006--APCO_ARGENTINA_INC/NEW