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TECPETROL INTERNACIONAL, S.L.(SOLE SHAREHOLDER COMPANY) AND WHOLLY-OWNED SUBSIDIARIES

Management Report and Consolidated Annual Accounts as of March 31, 2011.

CONTENTS

Management Report and Consolidated Annual Accounts as of March 31, 2011.

Consolidated Management Report as of March 31, 2011

Members of the Board of Directors as of March 31, 2011

Auditor`s Report on the Consolidated Annual Accounts

4 35

36

Tecpetrol Internacional, S.L. (Sole Shareholder Company) and Wholly-Owned Subsidiaries2

Consolidated Annual Accounts as of March 31, 2011

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Drawing up of the Consolidated Annual Accounts and Management Report Correspondingto the Accounting Period Closed

Consolidated Statement of Comprehensive Income

Consolidated Income Statement

Consolidated Cash Flow Statement

Notes to the Consolidated Annual Accounts

39 42

44

117

43

43

46 47

3Management Report and Consolidated Annual Accounts as of March 31, 2011


INTRODUCTIONTECPETROL INTERNACIONAL, S.L.U. and its wholly-owned sub-sidiaries (jointly referred to as the “Company”), are principally dedi-cated to the purchase, holding, ad-ministration and management of the shares, securities and any oth-er forms of representation of in-terests in the share capital of non-resident entities, as well as the following activities; the explora-tion, exploitation and develop-ment of hydrocarbon fi elds; the transport, transformation, distil-lation, refi nery, industrial use and sales of hydrocarbons and their by-products. The Company is incorpo-rated and domiciled in Spain.

INTERNATIONAL CONTEXTTowards the end of 2009, the fi rst signs of recovery began to make themselves felt in global terms fol-lowing the 2008 crisis. However, the world economy, particularly that of the U.S. and Europe, has not yet managed to show a clear trend for reactivation as regards global demand and employment levels. As of March 31, 2010 and 2011, the average WTI price was of United States dollars (“US$”) 81.30 and US$ 103 per barrel, respectively, refl ect-ing a growth in demand for this commodity over the last year. International oil market operators expect the price of oil to remain at these levels, bolstered by a number of diff erent factors arising from the strong growth of emerging econo-mies, in particular China and India. It is estimated that oil demand will remain steadier in 2011 than in 2010 and will reach some 89 million bpd, according to the projections made by the International Energy Agency (IAE) in its December newsletter.

CONSOLIDATED MANAGEMENT REPORT AS OF MARCH 31 2011

5Consolidated Management Report as of March 31, 2011

As of March 31, 2011

546.1

(338.1)

208.0

(7.1)

(41.2)

(20.9)

(6.7)

132.1

(6.1)

2.0

128.0

(46.8)

81.2

81.1

0.1


441.1

(269.9)

171.2

(6.7)

(27.7)

(6.9)

3.1

133.0

(3.6)

2.8

132.2

(31.7)

100.5

98.9

1.6

In EUR millions

Net sales

Operating costs

Gross profit

Selling expenses

Administrative expenses

Exploration costs

Other operating income and losses

Operating profit

Net financial income

Investments in associated companies

Income before tax

Income tax

Profit for the year

Attributable to:

Company shareholders

Non-controlling interests

ECONOMIC RESULTS AND FINANCIAL SITUATION TECPETROL INTERNACIONAL S.L.U. and its subsidiaries have prepared the Consolidated Annual Accounts according to the International Financial Reporting

Standards (IFRS) adopted for use in the European Union and ap-proved by European Commission Regulations applicable since March 31, 2011. The breakdown of the Consolidated Annual Accounts is given below:


As shown above, sales income for the fi nancial year ending March 31, 2011, was EUR 546.1 million, while income showed a profi t for the year of EUR 81.2 million (net of income tax worth EUR 46.8 mil-lion) presenting 15% of total net sales income.

The main fi nancial indicators are as follows:

TECPETROL INTERNACIONAL S.L.’s net consolidated equity as of March 31, 2011, came to EUR 518.1 million. The details of the most rel-evant fi gures are given below:


734.1

278.3

1,012.4

518.1

270.8

223.5

1,012.4


1.25

1.05

0.73

17%


665.3

193.6

858.9

433.3

295.1

130.5

858.9


1.48

1.02

0.77

25%

In EUR million

Non-current assets

Current assets

Equity

Non-current liabilities

Current liabilities

Liquidity

Solvency

Capital immobilization

Yield


Main risks associated with the businessThe Company carries out its busi-ness in a context vulnerable to cer-tain risks which could aff ect its operations. The Company’s revenue is generat-ed by its subsidiaries. Operations in Latin America are exposed to diff erent risks inherent to invest-ing in the region. Some risk factors include the signifi cant infl uence wielded by national governments on the economy, the devaluation or depreciation of local currencies, unexpected changes in regulatory frameworks and social unrest. The controlling Company has iden-tifi ed, analyzed and weighed up the risks in order to take invest-ment and operating decisions which will allow it to meet its ob-jectives satisfactorily.

COMMUNITY AND PERSONNEL RELATIONS

TrainingContinuing with its training and development policy, personnel members have taken part in train-ing activities throughout the cur-rent fi nancial year, both in pres-tigious universities and as part of in-company activities. The Company has also been represent-ed at various events held in diff er-ent countries, off ering staff the possibility to take specifi c techni-cal courses abroad.

Social DevelopmentThe Company works closely with the communities neighboring its operations, contributing to the de-velopment of each community and its institutions. In this spirit, it car-ries out and supports social devel-opment programs in low-income rural and urban areas, indigenous communities and schools in the vi-cinity of its fi elds, committing its personnel just as much as the local population to the development of its social programs. The Company is currently contrib-uting to the development of the community mainly through Micro SME programs, as well as with donations of health and school equipment with a view to improv-ing their living conditions.


Environmental safety and protectionThe Company and its subsidiar-ies, in particular the operating companies, all pursue the priori-ty objective of managing their op-erations to ensure that the phys-ical integrity of personnel and third parties is adequately pro-tected, as well as safeguarding the environment. Health, Safety and Environmental protection con-cepts have been integrated under this concept (“HSE”) as core man-agement values.

EnvironmentThe Company’s operating sub-sidiaries are currently running a number of diff erent programs to safeguard the environment, such as environmental impact stud-ies, monitoring and contingency plans, which analyze the potential impact a new project may have in order to plan for avoiding or min-imizing any damage to the envi-ronment; cleaning the landfi ll ar-eas inherited from past operators which helps to mitigate the impact of the diff erent fi elds on the land itself; the appropriate disposal of production waters, reinjecting

100% of these effl uents in order to eliminate the risks of contaminat-ing ground and subterranean wa-ters; the elimination of gas emis-sions which helps to diminish their eff ects on the atmosphere and reduces greenhouse gases; the acquisition of los impact seismic equipment; the prevention of oil spills and leaks; erosion control and environmental recovery by re-storing the areas aff ected, either by encouraging the process of natural revegetation, by restoring the orig-inal condition of the soil, or carry-ing out a replanting program with indigenous species, etc. Another key objective is the de-velopment and implementation of new systems and technologies aimed at preventing and reducing the impact on the environment. The Argentine subsidiary Tecpetrol S.A. was the fi rst oil company in its country to set up a new technology for treating oil-contaminated mud in the area of El Tordillo, solving a historic problem that all operating companies working in Argentine Patagonia have had, due to climat-ic conditions. Furthermore, work continued with the state company ENARSA to operate wind turbines in the area of El Tordillo and acquire the wind energy created within the frame-work of a pilot project for “Clean Development Mechanisms” (CDM) to reduce greenhouse gases.


Revegetation and reforestation ac-tivities were carried out with na-tive species in diff erent opera-tions in Argentina, Peru, Ecuador and Colombia to complement the drive to protect and care for the environment. In Peru, the Company was awarded the Integrated Health, Occupational Safety, Quality and the Environment Management cer-tifi cation by the quality control consultants TÜV Rheinland.In Bermejo, Ecuador, the ISO 14001 certifi cation for the Environmental Management System implemented was main-tained and the environmental li-cense for the operation of the en-tire block obtained. Drilling at the well El Rayo 5 was completed with environmental compliance levels of 100% and no “non-compliance” outstanding. In Colombia, the compliance re-ports for the 2D seismic survey proj-ect carried out in the three blocks (CPO-6, CPO-7 and CPO-13), were presented to the competent bodies, while the procedures to obtain the environmental licenses for the ex-ploratory drilling project planned for 2011-2012 were also begun.

SafetyThe key elements for the imple-mentation of a safety policy are leadership and commitment, in-tegrated safety, audits, prevention programs, accident and incident investigation, risk administration, improvement plans and safety ini-tiatives as well as the ability to manage change.The results obtained are moni-tored using the safety indices com-pared with the objectives set, the number of audits carried out mea-sured against the original num-ber programmed, and the number of positive and negative preventive observations (STOP). The main fo-cus was on managing the eff ective application of the key elements through a program called HSE Control Panel (STOP, audits, inci-dent reports).During the fi nancial year, as ev-ery year, prizes were awarded for Safety in each fi eld to groups of contractors with an outstand-ing performance in this area. The Annual ‘Alejandro Buchanan’ Safety prize was awarded to the Mexican operation’s System 3 area of the subsidiary Norpower S.A. de C.V. for achieving the highest safety indicators among all the operative subsidiaries in the Company.


2011

Total

53

639

692

Men

50

519

569

Women

3

120

123

Management and executive personnel

Other personnel

The safety results achieved during the fi nancial year were: 0.62 for the Lost Time Injury Frequency Rate for days missed (per million hours worked), while the index of record-ed accidents which measures lost days, fatalities, cases requiring med-ical treatment and restricted work duties, was 2.78. The objectives for 2010 were 1 and 2.5, respectively.

For 2011, the following objectives have been set: 0.6 for the Lost Time Injury Frequency Rate for days missed and 2.5 for the recorded ac-cident index.

PersonnelThe number of Company employ-ees at March 31 by category and gender is as follows:

Men

42

448

490

Women

3

98

101

2010

Total

45

546

591


HYDROCARBONS RESERVES Reserves are taken to mean the vol-umes of oil and gas (in oil-equivalent cubic meters) which generate or are associated with revenue in the ar-eas where each company operates or has a direct or indirect interest and which the Company has the right to exploit. This includes hydrocarbons volumes related to the service con-tracts in which the Companies have neither ownership of the reserves, nor ownership of the hydrocarbons extracted, as well as those volumes which are estimated will be pro-duced for the contracting party un-der the works contracts.

There are numerous factors which generate uncertainty as to the cal-culation of proven reserves, future production profi les, development costs and prices, including diverse factors which are beyond the con-trol of the producer. Reserve en-gineering is a subjective process which attempts to estimate the un-derground accumulation of crude oil and natural gas which involves a certain degree of uncertainty. The proven reserves of hydrocarbons estimated as of March 31, 2011, ac-cording to the share interests of the diff erent subsidiaries, are as follows: Oil – millions of cubic meters 16Gas – billions of cubic meters 44The aforementioned reserves in-clude proven reserves which may be extracted and from which roy-alties have not been deducted. The information was prepared by the Company’s technical person-nel based on the technological and economic conditions prevailing on the date in question. It takes into account the economic evaluation within the terms of the respective contracts or concessions.

TRANSPORT CAPACITY (G&P)

Utilization percentage

91.6%

95.3%

0%

Daily transport capacity in Mm3

54,400

7,935

2,800

Transport in Day/Mm3

49,830

7,563

0

GAS

Transportadora de Gas del Norte S.A.

Litoral Gas S.A.

Transportadora de Gas del Mercosur S.A.


ARGENTINATecpetrol S.A. carries out oil and gas exploration and production activities in Argentina, and in other Latin American countries, through those companies in which it owns shares. In Argentina, it op-erates the hydrocarbons-producing areas in the Noroeste (Northeast), Golfo de San Jorge (San Jorge Gulf) and Neuquina basins. The main zones are El Tordillo in the San Jorge Gulf, and Aguaragüe in the Northeast. The company holds a 25% stake as a non-operating partner in the Ramos area in the Northeast basin. During this accounting period, sev-en new wells were drilled in the El Tordillo-La Tapera-Puesto Quiroga areas in the Province of Chubut, with one rig. A further 39 well re-pairs were carried out and the de-velopment of the secondary and tertiary (gels) recovery programs continued as planned. In the areas of Estancia La Mariposa-Lomita de la Costa, in the province of Santa Cruz, three new wells were drilled and repairs were carried out with en-couraging results. The fi nal phase of the Rxp-1012 exploratory well was completed in Ramos (province of Salta) where production was obtained sole-ly from the well’s non-exploratory objectives.

EXPLORATION AND PRODUCTION (E&P) OPERATIONS

In Aguaragüe (province of Salta), drilling began during October 2010 on the side track to well CD xp-1001 at Campo Durán which aims to recover well productivity (dam-aged by drilling mud due to bro-ken pipes) so as to continue drain-ing reserves. In the Hickmann area (province of Salta) drilling took place from April to August 2010 at the explor-atory well Campo Libre x-1. The well was abandoned without being piped on the basis of the informa-tion provided by the drilling exer-cise. Tecpetrol S.A. sent the provin-cial government of Salta a letter at the end of 2010 explaining its deci-sion to return the entire area cov-ered by the exploratory permits. In April 2010, the extension to the Los Bastos and Fortín de Piedra concessions was signed in the province of Neuquén. The exten-sion is for a further ten years, un-til 2026 and 2027 respectively. In the Los Bastos areas, three explor-atory wells were drilled in October and November 2010, two of which (PdT.x-1 and PAS.x-1) had excellent results, while the third was aban-doned without piping (Cse.x-1). Between May and September 2010, fi ve development wells were drilled in the Los Bastos Sur fi eld, of which four proved to be success-ful (LBS-1015, LBS-1019, LBS-1018 and LBS-1016) and one was aban-doned without being piped (LBS-1017) as water was found in the rel-evant layers.


In the Neuquina basin in the Agua Salada area in the prov-ince of Rio Negro, four develop-ment wells were drilled from May to December 2010. One was aban-doned without piping (LB-1029) while the other three had very good results (LJ-1037, LA-2 and ADIS-4). In November, a workover was carried out on well LB-1012 to turn it into an injection well, ex-panding the secondary recovery project in the area, while a further three workovers were carried out (LA.x-1, ADIS.x-1 and LJ-1037) to in-crease production. In the Río Atuel area in the prov-ince of Mendoza, the exploratory work agreed in the 2009 contract awarding the area is currently un-der way, including the series of 3D seismic surveys which began to-wards the end of March 2010 with an investment of approximate-ly US$ 17 million. The surveys are nearly 60% complete. As regards the sale of oil, 100% of Argentine production was sold on the local market to refi neries. Resolution ME N° 234/07 lays down crude oil export duties within a quota which varies according to

the international price for crude oil and establishes a cut-off value of 42 dollars per barrel and a ref-erence price of 60.9 dollars per barrel for WTI. As a consequence of this measure, taken by the Argentine Ministry of Economy, all kinds of crude oil in the country began to be sold on the domestic market at prices that absorbed the impact implied by such a measure. As from December 2009, the fi xed price charged was slightly higher, although there continued to be a signifi cant negative balance com-pared with international prices. Decree N° 2014/08 created subsi-dies to act as incentives for fu-ture investments in reserves, pro-duction and refi neries, followed by Resolution SE N° 1312/08, which regulated the earlier measure. The measure now allows a producer, for instance, to receive a subsidy for an increase in reserves, and for an increase in, or maintenance of, production levels, as well as for the export of crude oil by those com-panies able to show improvements in the performance of reserves and production indicators as es-tablished in the same, compared with the indicators provided by the company itself for the fi rst six months of 2008 (baseline).


The Resolution adopted by the Planning Ministry (Ministerio de Planeamiento y Obras Públicas - MPyOP) No. 295/10 established that fuel prices at the pump should re-main at the same level as those published on July 31, 2010, without the possibility of adjustments. As a result of this measure, nearly all the refi neries froze the purchase prices for their raw materials at September 2010 levels, less than the prices originally agreed for the last quarter of 2010. Although this resolution was derogated to the end of December 2010, the conse-quences arising from the measure continued to have an impact until the end of the fi nancial year. As regards gas sales during the ac-counting period, 41% of income from natural gas sales corresponded to industrial users and 36% to electri-cal power stations, while 17% came from distribution license holders and 6% from CNG service stations.

The disputes with the Company’s Chilean clients concerning the ex-port restrictions imposed by the Secretariat of Energy, have been re-solved. In March 2010, Tecpetrol S.A. adhered to the terms and conditions of the “Agreement with Natural Gas Producers 2007-2011”, enshrined in Resolution SE Nº 599/07. In the framework of Resolution SE Nº 24/08 and its complemen-tary measures, which created the incentive program for natural gas production called “Gas Plus”, Tecpetrol S.A. has presented 19 gas projects to the Argentine Energy Secretariat with a view to qualify-ing for Gas Plus. During 2010, 15 of these projects were approved, and currently only four are pending resolution. Additionally, Letters of Intent have been signed with Natural Gas Distributors for the development of these projects. During this accounting period, there have not been any increases in natural gas prices in the segment of Distribution Licensees, CNG stations and electrical power generators.


PERUThe Company is active in Peru through its stake in the companies Tecpetrol del Perú S.A.C., Tecpetrol Bloque 56 S.A.C. and more recent-ly through the company Tecpetrol Lote 174 S.A.C.. The Company owns 100% of the share capital of these companies. Tecpetrol del Perú S.A.C and Tecpetrol Bloque 56 S.A.C. hold a 10% stake as non-operators in the li-censing contracts to exploit hydro-carbons in Bloques 88 and 56, re-spectively. These contracts with PERUPETRO S.A were signed, to-gether with other oil companies, on December 9, 2000, and September 4, 2004, with the aim of producing hydrocarbons in these areas. As of December 31, 2010, the cumu-lative investments in Bloques 88 and 56, which correspond to the Company’s 10% stake in these com-panies, reached EUR 130 million and EUR 72 million, respectively. Bloque 88: after commencing ac-tivities in August 2004, operations have proceeded as expected, main-taining both production and rein-jection capacities in excess of the original levels projected. During 2008, development began in the “Cashiriari” fi eld with a total of ten wells (eight new ones and two re-entries to existing wells) with their respective fl ow-lines to the Malvinas plant. Bloque 56: during September 2008, the Pagoreni fi eld began produc-tion, reaching daily output lev-els over and above the amounts forecast (35,000 bbl/day). In the

fi rst phase, output was produced by four wells while two others were used as reinjection wells. As from March 2010, the production scheme was modifi ed so that all six Pagoreni wells could be used for production purposes. As regards the natural gas mar-ket, there has been an increase in demand over and above orig-inal expectations. This is the re-sult of strong growth in the elec-trical power generation sector and the reconversion to natural gas of small and medium-sized industries in areas surrounding the Peruvian capital city. Currently, gas sales commitments are slightly lower than certifi ed proven reserves. During 2008, LPG exports started up again with prices which were slightly higher than MBV quotes, while LPG prices on the domestic market maintained their levels of MBV + bonus. Bloque 56 has begun selling nat-ural gas to its exclusive client, PLNG, having made its fi rst NGL export on June 22, 2010. It is es-timated that by the beginning of August, the maximum lev-els foreseen in the contract will


be being dispatched, equivalent to 620MMcf/d, to be maintained throughout the contract. Following a period of evaluation lasting several months during which a range of diff erent blocks were placed on off er in the bidding round for exploration in 2010 by PERUPETRO in November 2010, the Company was awarded Bloque 174. As a result, the company Tecpetrol Lote 174 S.A.C. was created, whose main objective is the exploration, exploitation and development of hydrocarbons fi elds. Bloque 174 is part of the same oil system which gave rise to Camisea, lying 120 km north of the Camisea gas and condensed gas fi elds. The subsidiary Tecpetrol Lote 174 S.A.C has ownership rights over the hydrocarbons extracted while PERUPETRO will oversee the proj-ect. The exploration period will last for seven years, divided into fi ve phases. If there is a fi nd, the

total duration of the contract will be of either 30 or 40 years, depend-ing on whether oil or associated gas is found, respectively. The work program includes the reprocessing of 200 km of 2D seismic studies, geological and geophysical stud-ies during the fi rst phase of explo-ration, while the second phase in-volves 150 km of 2D seismic studies and the third envisages the drilling of an exploratory well.

MEXICOThe Company operates in Mexico through its shares in the compa-nies Servicios Múltiples de Burgos S.A. de C.V. (“SMB”) and Burgos Oil Services S.A. de C.V. SMB’s shareholding is as follows: Tecpetrol de México 30%, Burgos Oil Services 20%, and Industrial Perforadora de Campeche S.A. de C.V. 50%.SMB was created for the express purpose of being a co-signatory with PEMEX Exploración y Producción (PEP), a subsidiary of Petróleos Mexicanos (PEMEX), of the Public Works Contract award-ed by International Public Call for Tender No. 18575008-130-03. SMB was set up to undertake all the ac-tivities required to comply with the object of the aforementioned contract as regards the execution of the requisite works related to the development, infrastructure and maintenance of non-associat-ed gas fi elds in the Burgos Basin, in the Bloque Misión. This area lies in the states of Tamaulipas and Nuevo León and is delimited to the north by the River Bravo, Mexico.


The Financed Public Works Contract signed with PEMEX stip-ulates minimum investment com-mitments for each phase of the Contract. These commitments are set in Work Units (WU) which have an original unit value of US$ 9,900 each and are indexed to U.S. infl a-tion for adjustment on a yearly ba-sis. Until the close of 2010, 39,922 Work Units were carried out, 378% in excess of the minimum invest-ment commitment set for the fi rst seven years. During 2010, activity levels were maintained with a sin-gle drilling rig to develop the dif-ferent fi elds making up the Bloque Misión as well as those activities to develop exploration opportu-nities. On December 31, 2010, the Second Contractual Year of the Third Phase of Development ex-pired with no contractual commit-ments outstanding. Due to the security risks in Mexico, during April 2010 SMB signed an operational agreement with PEMEX aimed at reducing risks for personnel as well as for the en-vironment and surface installa-tions, while seeking to ensure com-pliance with SMB’s obligations

concerning the development works, infrastructure and main-tenance in a timely fashion. Thus, several projects planned in diff er-ent fi elds (Santa Anita, Arcabuz, Géminis, Quitrín, Troncón, etc.) which could not be carried out for security reasons were repro-grammed. Furthermore, joint ac-cess to the fi elds with PEMEX was agreed. Well-capping for a number of wells in these fi elds was carried out in the framework of the oper-ational agreement between SMB and PEMEX, where there is limited daytime access to the fi elds. Burgos Oil Services S.A. de C.V., was incorporated on March 2, 2001, as Elina 410 S.A. de C.V., ac-cording to Mexican legislation.


Following certain modifi cations to the company name, at the General Extraordinary and Ordinary Shareholders’ Assembly held on October 3, 2007, the Shareholders agreed to change the name offi cial-ly to Burgos Oil Services S. A. de C.V. (“Burgos Oil Services” or “BOS”) and its corporate purpose was mod-ifi ed accordingly. Since then its stated purpose is to provide tech-nical services for the projection, engineering development, gener-al construction, and drilling of oil and gas wells as well as the explora-tion, exploitation and provision of maintenance, engineering and de-velopment services to oil fi elds. On March 25, 2010, BOS complet-ed its acquisition of 100% of the share capital of Erskine (see the sec-tion on the United States), located in Houston in the state of Texas, United States, which in April changed its name to Tecpetrol Corporation.Furthermore, on April 5, 2010, the subsidiary BOS and PEMEX Exploración y Producción (PEP) signed a public works contract in which BOS undertakes to perform all the works involved in the tech-nological development laborato-ry (fi eld laboratory) in the Coyotes fi eld for Active Integrated Tertiary Gulf Oil, a project under the gener-al management of PEP. This means that PEP is responsible for approv-ing the proposals and programs presented by Burgos Oil Services regarding any of the stages or phases included in the contract,

on the basis of which PEP will re-quest BOS to implement them through the pertinent job orders. BOS will not have any share in the hydrocarbons extracted from or produced by any of the develop-ment or exploratory wells includ-ed in the contract, and PEP will not make it party to any consid-erations arising from the produc-tion of the wells. BOS solely enjoys the right to receive the consider-ations foreseen in the contract in exchange for the works undertak-en and contemplated in the same. The contract contemplates three phases of operations, which are al-ready under way: stage one, involv-ing geosciences and production studies; stage two, maintenance works, and stage three, develop-ment works. BOS undertakes to perform the tasks given in the con-tract mentioned above as from April 5, 2010, and to complete these by no later than December 31, 2012. The BOS operation covers 156 wells, of which 138 are currently in oper-ation while another 18 are awaiting reactivation. Subsequently, BOS signed two agreements amend-ing the contract with PEP. The fi rst is related to the acquisition


of hydraulic and the second is an agreement modifying Laboratorio Coyotes. The main amendments in-clude changes to the volumes of the diff erent items on the price list of elements needed for execution, such as pumps, measuring rods, etc.) and the incorporation of the Coyotes Battery I (an additional 47 wells) and UBH Cameron (the in-corporation of 25 units for EUR 2 million, with a margin for BOS of US$ 0.5 million for all the units). BOS has also committed to pres-ent PEMEX PEP with a technical and economic proposal to manage Campo Soledad Norte (lying next to Coyotes).The low permeability of the Coyotes fi eld means that conven-tional wells are not very produc-tive. BOS has thus opted to go for horizontal drilling, which means that it will come into contact with a greater area of the reservoir and improve the relationship between investment and production. This technique is similar to that used in the United States to develop Shale Gas projects, which extract gas from clay soil. In this case, the same system will be used to pro-duce oil. The fi rst horizontal drill-ing program fi nalized during May, and is now awaiting completion. The future viability of the drilling campaign will be analyzed according to the results of the well drilling.

ECUADORTecpecuador S.A., wholly owned by the Company, was awarded the Campo Marginal Bermejo in Ecuador to exploit crude oil and car-ry out additional hydrocarbons ex-ploration work in order to increase current production levels and incor-porate new reserves in the area. The contract signed with the Ecuadorian State through its intermediary Petroecuador and Tecpecuador S.A. (the Contractor) will have a duration of up to 20 years. Tecpecuador S.A. has committed to undertake the activities and make the necessary investments using the best technology avail-able at its sole risk and responsibil-ity. The company also committed to carrying out the requisite tech-nical, economic and administra-tive operations and to implement-ing the Minimum Program for Exploitation Activities and invest-ment commitments for the fi rst three years, worth a total of EUR 27 million). It undertook to safeguard the environment employing best industry practices and techniques.


As of the date of these annual ac-counts, the investment commit-ments have been met 100%. In Ecuador, on January 22, 2011, the amendment contract between the State of Ecuador, represented by the Hydrocarbons Secretariat, the Secretaría de Hidrocarburos, and the subsidiary Tecpecuador S.A. was signed. The contract con-cerns the model for the provision of services for the exploration and exploitation of hydrocarbons, ac-cording to the fi rst temporary dis-position given in the Law amend-ing the Law of Hydrocarbons and the Internal Tax Regime Law, published in the Registro Ofi cial Suplemento No. 244 of July 27, 2010. The contract was registered at the Registro de la Secretaría de Hidrocarburos on February 17, 2011, and is applicable until July 30, 2019.

The parties agree that Tecpecuador shall have the right to charge a tar-iff for the fi elds in production of US$ 24 per net barrel produced and delivered at the Control and Delivery Center. This tariff takes into account an estimate of the de-preciation of investment, costs and expenses as well as a reasonable profi t which also contemplates the risks incurred.This renegotiation also covers the exploration of pre-Cretaceous ba-sin. This is a high risk objective, as there are no records of the exis-tence of oil systems at these levels. During 2010, diff erent activities were carried out with a view to in-creasing and maintaining pro-duction levels. To this end, invest-ment focused on reconditioning activities (3), pulling (13), and drill-ing and completing a development well in Campo El Rayo (ER05). The reconditioning work mainly in-volved carrying out tests in new zones and sinking new boreholes at intervals. Pulling work primarily includ-ed the replacement of mechani-cal pump sucker rods and the ex-change of three extraction systems. The average output of the fi eld during 2010 was 4,406 bbl/d with 43 production wells.


UNITED STATESAs mentioned earlier, in March 2010, Burgos Oil Services S.A. de C.V. completed the acquisi-tion of 100% of the share capital of Erskine, located in Houston in the state of Texas, United States, which subsequently changed its name to Tecpetrol Corporation in April. Tecpetrol Corporation carries out oil and gas exploration, exploitation and production activities in the south of Texas, and has shares in eight fi elds, of which it operates seven.During April 2010, the company began workovers and minor repair work, and by the end of the 2010 fi nancial year had completed a total of fi ve major workovers and 15 repairs. In October 2010, drilling began in the Ann Mag fi eld with the deep well Perez Alaniz A-2. Wells Sullivan #20 and Sullivan Deep C-5 were also drilled.2010 production levels reached a total of 15MMcf/d (75% gas, 25% condensates + NGL), of which 10 MMcf/d correspond to Tecpetrol Corporation’s share, with some 50 wells in activity to-date.

COLOMBIAIn Colombia, the Company operates through Tecpecol S.A., in which it has a 100% stake.Tecpecol S.A. has been set up in ac-cordance with Colombian legisla-tion and states as its main activ-ity the exploration, exploitation and development of hydrocarbons fi elds; the transport, transforma-tion, distillation, refi nery and the industrial use of hydrocarbons; the commercialization of hydrocar-bons and their derivatives, and; the provision of operations, mainte-nance, and hydrocarbons fi eld de-velopment services to third parties.In November 2008, CPO6, CPO7 and CPO13, three exploratory blocks ly-ing next to each other in the pro-lifi c Llanos Orientales basin were pre-awarded. This is an explorato-ry zone with a very high potential. Tecpecol S.A. formed a consortium with the company Inepetrol from the Inelectra Group with stakes of 80% and 20% respectively, with Tecpecol acting as operator for all the blocks.


On January 14, 2009, the E&P con-tracts with the Agencia Nacional de Hidrocarburos – ANH (National Hydrocarbons Agency) were signed. The awardee has a three-year term in which to comply with the exploratory commitments in-cluded in the fi rst phase. As the three blocks are adjacent, a 2D seis-mic survey was carried out over 2,000 linear km to take advantage of this synergy. In August 2010, the seismic survey was completed in all three blocks, except for the area of Refugio El Tigre, where, for the time being, the local community is in opposi-tion to the project. On the basis of new discoveries made in neighbor-ing blocks Quifa and Rubiales, the decision was taken to survey an ex-tra 80 km in addition to the dis-tance initially planned at Bloque CPO7, in order to produce the right seismic profi le and identify further possible opportunities. During September 2010, the envi-ronmental zoning impact stud-ies for the three exploratory blocks awarded were presented to the Ministerio de Ambiente, Vivienda y Desarrollo Territorial (Ministry of Environment, Housing and Land Development). These studies are a pre-requisite for exploratory drilling. The locations for the drilling of the 6A- 1 (Palenque) and 6B (Puerto Gaitán) wells in Bloque CP06 were agreed among the partners and fi eld work started following the agreement to develop the envi-ronmental management plans for exploratory drilling and detail engineering.

BOLIVIAThe Company is active in Bolivia through Tecpetrol de Bolivia S.A., owned by Tecpetrol S.A.Tecpetrol de Bolivia S.A., a subsid-iary of Tecpetrol S.A., holds a 20% stake in the Operating Contracts for the Ipati and Aquío Blocks as a non-operating partner. Both operating contracts estab-lish that the private partners (Total E&P Bolivie, Suc. Bolivia and Tecpetrol de Bolivia S.A.) are re-sponsible for carrying out the oil operations (exploration, evalua-tion, development, exploitation and well-abandonment) at their own risk and expense, in exchange for a return on the output pro-duced and delivered to Yacimiento Petrolíferos Fiscales Bolivianos (YPFB) which is exempt from both risk and responsibility as regards either oil operations or their re-sults. In this context, Tecpetrol de Bolivia has no property rights to ei-ther the hydrocarbons fi elds or the hydrocarbons produced, as both belong to YPFB.On August 7, 2008, Phase 4 of the Ipati Block exploration was com-pleted, as the exploratory zone known as Ipati Norte was returned on July 16, 2008. There are accord-ingly no exploration commitments pending in Ipati.


The Aquío Block is now in Phase 3 of exploration which ended on May 1, 2011. On February 1, 2010, work began to drill the explor-atory well AQI-X1001 in the Aquío Block. On April 14, 2011, the opera-tor Total E&P Bolivie notifi ed YPFB of the existence of hydrocarbons in the Huamampampa formation

VENEZUELAIn the framework of the policy car-ried out by the Government of Venezuela, the previous Operating Concessions have been declared null and void, due to the fact that all oil-producing activities have passed into the hands of Joint Ventures as from the beginning of 2006. Consorcio Colón, in which Tecpetrol de Venezuela S.A. holds a 43.75% interest, was converted into the joint venture Baripetrol S.A. in which PDVSA owns a 60% controlling interest, while the private sector shareholders own the remaining 40%.Since the operation migrated to the joint venture, the Consortium now only undertakes residual ac-tivity related to the administra-tive and operational services it pro-vides to Baripetrol S.A.Currently, a decision is expected from the majority shareholder to approve the realization of the div-idends already approved by the Management Board of Baripetrol S.A. for 2008 and 2009.

Estimates of recoverability of development assetsIn order to confi rm that the costs of investments and Property, plant and equipment taken jointly do not exceed their recoverable val-ue, the Company and its subsidiar-ies carry out periodic evaluations of their utilization value, using the method of future fl ow of funds discounted at the updated rate of these funds which is considered representative for the purposes of calculating the aforementioned confi rmation. Certain premises are considered, such as: the evolution of hydrocarbons production levels and sales prices over the progress of the curve of future prices set by Western Texas Intermediate (WTI), infl ation, the exchange rate and costs, and other expenditure. This ensures that the best possible esti-mates can be made permitting the Company and its subsidiaries to project future operations with as much accuracy as is feasible. Company management has used certain premises and estimates to formulate this determination on the basis of information available at the date of these annual accounts. These premises and/or estimates may not be realized in the future and hence the real future results, for better or worse, may be diff er-ent to those calculated, taking into account circumstances at the time.


GAS AND POWER TRANSMISSION AND DISTRIBUTION (G&P)

ARGENTINAThrough its subsidiaries, the Company undertakes gas and power

Transportadora de Gas del Norte S.A. (“TGN”), began operations at the end of 1992 and has since then developed a major investment plan to build 5,176 km of gas pipelines and the capacity to transport 54.4 MMm³/day of natural gas, with 333,580 HP installed at 17 compres-sor stations. TGN operates two trunk gas pipe-lines linking fi elds in the north and center-west of Argentina allows the Company to satisfy the needs of countries in the Southern Cone.

(G&P) transport and distribution op-erations working with diff erent com-panies whose stake is given below:

The measures adopted by the Argentine government in 2002 and the situation to-date have sub-stantially modifi ed the condi-tions of the original legal and con-tractual framework in which TGN operated until December 2001. Tariff -freezing, along with the de-valuation of the Argentine peso to a quarter of its value prior to the end of 2001, led to a major imbal-ance in TGN’s fi nancial and eq-uity structure. This situation in turn led to the temporary non-ful-fi llment of commitments with fi -nancial creditors and the ensuing need to propose a restructuring of

23.53%

12.58%

11.63%

10.33%

3.75%

2.80%

20.00%

32.68%

20.00%

14.63%

10.90%

64.16%

8.34%

46.67%

24.16%

Other shareholders (direct or indirect)

Blue Ridge Investments

Transcogas Inversora S.A.

Total Gas y Electricidad Argentina S.A.

Petronas Argentina S.A.

Total GasAndes

Compañía General de Combustibles S.A.

Others

Total Gas y Electricidad Argentina S.A.

CMS Operating S.R.L.

Petronas Argentina S.A.

Compañía General de Combustibles S.A.

Suez - Tractebel S.A.

Others

Suez - Tractebel S.A.

West LB International S.A.

Country

Argentina

Argentina

Argentina

Argentina

Direct and indirect stake

15.38%

21.79%

27.50%

29.17%

COMPANIES

Transportadora

de Gas del Norte S.A.

Transportadora

de Gas del Mercosur S.A.

Litoral Gas S.A.

Energy Consulting

Services S.A.


the company’s fi nancial debt. After four years of negotiations with its creditors, TGN was fi nally able, at the end of September 2007, to con-summate the voluntary restructur-ing of its fi nancial debt. As a result of the resolutions ad-opted by the Board of TGN on December 11, 2007, and the Shareholders’ Ordinary Assembly on January 22, 2008, a new Global Program was approved for the is-sue of ordinary corporate bonds non-convertible to shares, for up to US$ 400 million (EUR 300 million) or its equivalent in other curren-cies in use at any time.Nonetheless, the erosion of the fi -nancial and economic equation caused by the continued freez-ing of domestic tariff s combined with a drop in revenue from gas carriage for export as a result of gas shortfalls and widespread

increases in Argentine peso and US dollar denominated costs prompts uncertainty as to TGN’s future ca-pacity to meet its fi nancial com-mitments as originally agreed. In this context, TGN’s Board decid-ed to suspend the capital and in-terest repayments on its fi nancial debt as of December 22, 2008. The sum total of this debt comes to US$ 411.7 million (EUR 309 million), of which neither the capital of US$ 82.7 million (EUR 62 million) nor the interests of US$ 59.49 million (EUR 45 million) nor US$ 7.4 mil-lion (EUR 6 million) in punitive in-terests have been repaid.Although the decision to suspend the repayments of its fi nancial debt was taken with the explic-it purpose of enabling the secure and reliable provision of public natural gas carriage services, pre-serving the principle of an ac-tive company and ensuring equal treatment for all its fi nancial debt-ors, on December 29, 2008, the Argentine Regulatory Gas Entity


(Ente Nacional Regulador de Gas - ENARGAS) took the decision to in-tervene for 120 days. This interven-tion was successively extended and is still in application. It should be noted that TGN has continued to supply public services as charged and in a normal fashion without aff ecting either customers or users in general in any way. On April 23, 2009, TGN announced the presentation of a swap off er and requested an out-of-court re-payment plan (Acuerdo Preventivo Extrajudicial - APE) for the total re-structuring of its fi nancial liabil-ities. This was subsequently im-proved upon and amended by a new off er and request for out-of-court repayment plan made on September 8, 2009. This off er re-ceived an acceptance level in the order of 87.97%; however, the re-structuring process was delayed by the judiciary upon the request of the Argentine Social Security Administration. In mid-July 2010, this confl ict was unblocked and as a consequence, the Company expects the restructuring pro-cess to terminate in a reasonable timeframe. Furthermore, TGN hopes to reach a full understanding with the Argentine Government before re-investing in the assets required to satisfy the demands of an economy with a projected positive growth. It thus continues to work with the Argentine authorities and is making every eff ort to return to the path of growth in the shortest time possible.

Transportadora de Gas del Mercosur S.A. (“TGM”): In 2000, TGM began commercial opera-tions in compliance with its con-tractual obligations to provide YPF S.A., with the capacity to transport up to 2.8 million m3/day of natural gas along TGM’s 24 inch-diameter, 422 km-long pipeline for delivery at the sub-fl uvial frontier between Argentina and Brazil under the riv-er Uruguay near the town of Paso de los Libres in the province of Corrientes. On the base of the norms adopt-ed by the Argentine Government aimed at palliating the eff ects of the energy crisis in the short term, the Under-secretariat of Fuels (Subsecretaría de Combustibles) passed a series of measures sus-pending the export of certain vol-umes of natural gas in order to se-cure domestic supply. As a result, on April 15, 2009, TGM announced the signature of a transport agree-ment with YPF, which is its only source of income. During this fi nancial year, in re-lation to the recovery of the value of Tecpetrol Internacional S.L.U.’s stake in the share capital of TGN and TGM, the Company carried out recoverability tests on those of its assets related to TGN and TGM. The hypotheses, premises and esti-mates of future events used to car-ry out these tests are based on the range of operating and commer-cial scenarios as regards the ac-tivities and prices projected by the operating companies them-selves. This takes into account the outlook projected by the Group’s


Management concerning income tax considerations, scenarios for the perception of dividends arising from these investments and the rate of funding fl ow adjustment. In the case of TGM, these estimates may be further aff ected by the un-certainties related to the evolution of its commercial contract, includ-ing economic compensation for the same. The development of the business in both companies is un-predictable, and hence it is diffi -cult to calculate the generation of a future fl ow of funds which would allow the value of the aforemen-tioned assets to be recovered. Litoral Gas S.A. (“Litoral Gas”) is constituted in Argentina where it undertakes its operations on an exclusive basis. It distributes nat-ural gas through networks in the geographical area made up of the province of Santa Fe and the north of the province of Buenos Aires. It began operations in December 1992 following the privatization of the state-owned company Gas del Estado S.E.

Litoral Gas provides services through its fi fteen sales offi ces to nearly 616,000 residential, com-mercial and industrial clients as well as power stations, compressed natural gas expenders and sub-dis-tributors through 1,854 km of pipe-lines and 9,305 km of distribution networks. The company services a geographical area covering 136,387 km2 and a population of 3.5 mil-lion people. This area is home to major industrial companies and thermal power stations. During 2010, the total number of clients continued to grow. This increase, in the order of 3%, took place with-in the context of the low consum-er tariff s in comparison with alter-native fuel. Capital investments for the cur-rent fi nancial year were in excess of US$ 12 million (EUR 8 million), and totaled approximately US$362 million (EUR 272 mil-lion) in the period from 1993-2010. Despite the tariff -freeze, 175 km of pipelines were added to the net-work during 2010. As of December 31, 2010, the distribution network of Litoral Gas had reached a total of 11,300 km. This represents an in-crease of 125% since the outset of the company’s operations. Energy Consulting Services S.A. (ECS) pursues sales and consul-tancy activities in the energy mar-kets of Argentina and other Latin American countries where it has been operating since 1994. ECS provides customized global energy solutions for its clients.


It is worth noting that the Argentine macroeconomic context has con-ditioned ECS’s activities, although the company has unceasingly dem-onstrated its fl exibility and will-ingness to take part in new busi-ness opportunities. The Argentine regulatory framework nonethe-less continues to be the object of changes which have an adverse ef-fect on decision-making for long-term commitments. The future de-velopment of ECS thus relies on key features such as fl exibility, the company’s ability to adapt to its surroundings and the search for new business opportunities. Consultancy services have main-tained their share, extending their coverage to more countries in the region. The management business for large users and new direct con-sumers was maintained with a pos-itive contribution to the result.

MEXICOPEMEX Exploración y Producción (PEP), the subsidiary of Petróleos Mexicanos (PEMEX) in charge of upstream activities, held a call for tender for the provision of servic-es over a ten-year period to ensure the integrity and reliability of the pipelines making up System 3 in the states of Tabasco, Chiapas and Campeche in South-East Mexico.

The Energy, Engineering and Construction divisions of the Techint Organization presented a joint bid and were awarded the contract. An ad hoc company has been in-corporated for this purpose, (Norpower S.A. de C.V., constituted in Mexico), in which the Company has a 60% stake (through Tecpetrol Internacional S.L.U., 59.4% and Tecpetrol S.A. 0.6%) and 40% belongs to Techint S.A. de C.V. (Mexico). On December 3, 2009, Norpower S.A. de C.V. (“Norpower”) and PEP agreed to sign a public works con-tact for a ten-year period to pro-vide services over a ten-year pe-riod to ensure the integrity and reliability of the pipelines mak-ing up System 3. Norpower S.A. de C.V. is responsible for ensuring the integrity and reliability of the hy-drocarbons pipeline transport sys-tem as enshrined in a ten-year con-tract divided into two phases, the fi rst one of 36 months and the sec-ond one of 84 months. The period of the contract may be extended by means of an agreement signed be-tween the parties for this purpose.System 3 is a complex of 1,400 km of pipelines (101 pipelines, 70% Gas Natural) stretching across 560 km of rights of way (43 rights of way), 54 measurement points and 122 junctions (62 km) to sur-face installations.The contract includes pipeline maintenance activities, rights of way and measurement points, the provision of technical assistance to PEP regarding pipeline mainte-nance and operations; periodic re-views of the situation with the own-ers of the rights of way and the implementation of a program to


regulate and carry out specifi c tasks for the substitution, modifi cation, removal capping and dismantling of stretches of pipeline, substitu-tion of valves and monoblock joints, the provision and installation of scraper traps, repair of right of way slippage, two river fords by direct-ed drilling, and the automation of cathode protection systems. The total amount to bill to PEMEX according to the contract comes to US$ 268 million (EUR 201 million), of which US$ 127 million (EUR 95 million) correspond to pipeline, rights of way and measurement point maintenance activities; US$ 31 million (EUR 23 million) to a comprehensive list of tasks to be executed in the fi rst three years, and the rest (US$ 110 million) to works to be assigned over time at the behest of the PEP and/or as proposed by the contractor. Activities are divided into Work Concepts (WC). The minimum work-ing obligation is made up of CTs 1 and 2 (maintenance) and by Annex B2 (tasks to be carried out in the fi rst 36 months, phase1). The CTs 3 and 4 are assigned a specifi c amount in the contract but are to be carried out either as proposed by Norpower or as requested by PEP.

The timeline for the tasks is deter-mined at the outset of the contract in the Master Execution Program (MPE) which distributes the Work Units (WU) on a yearly basis and defi nes the yearly amounts to be executed. The contract foresees the execution of 17,800 WU for WC 1 and 2 as well as 12,300 WU for WC 3 and 4 (30,100 WU in total). The MPE is adjusted on an annual ba-sis by the Annual Work Programs (AWP) which are proposed by Norpower at the outset of each year for PEP’s approval. These give details of the activities to be car-ried out over the year, including the work of the WU 1 to 4 and the work covered in Annex B2, in ad-dition to the proposal for PEP per-sonnel training and community actions, for instance. The prices in the contract are giv-en in US dollars and adjusted on an annual basis using a PPI index “Pipeline Transportation of Crude Oil” published by the U.S. Bureau of Labor Statistics. This index may be modifi ed by just cause with the prior agreement of the parties.


Payments to the Contractor must be made on a monthly basis against the presentation of reports and supporting documentation as requested by PEP. The contract in-cludes the possibility of making U.S. dollar payments abroad. During November, a number of work proposals were agreed with PEP to carry out tasks inferior to WC3 (mostly the supply and instal-lation of valves) which require spe-cial approval and payment proce-dures, and represents additional income for the Company.

Finally, TGT de México S.A. de C.V. was constituted in March 1999, al-though it had not yet begun opera-tions as of December 31, 2010, ren-dering it practically inactive. Its main activity is the provision of natural gas carriage services, the performance of all legal or mate-rial activities directly or indirect-ly related to this activity, including the construction of pipelines for carriage purposes.


OUTLOOK AND PROJECTS

In Argentina, in the area of El Tordillo, work will continue with drilling, including eleven deep wells with one rig. Forty-four pri-mary and thirty secondary work-overs will be carried out as well as two conversions to drainage wells in order to handle water excess. Work will continue with six work-over rigs and the tertiary recovery project using polymer injections. As regards the product collection installations, the main investments planned concern the purchase of pumping equipment, the upgrade of pipelines and collection pipes, the electrifi cation of far-off wells and plans to forestall corrosion and rusting. In the Neuquina basin, work will continue with drilling, including exploratory wells foreseen in the Gas Plus program.Furthermore, the building of in-frastructure works in Los Bastos is planned, including pipelines and storage tanks in order to expand hydrocarbons transport and pro-cessing capacity.In Río Atuel, the Argentine subsid-iary Tecpetrol S.A. will continue with the exploratory work current-ly under way, including the record-ing, processing and interpretation of 3D seismic studies, according to the commitments undertaken with the province of Mendoza. As regards the commercialization of crude oil, sales will continue to be made principally on the domes-tic market. Concerning gas, and given that Tecpetrol has adhered to the “Agreement with Natural Gas Producers 2007-2011”, sales will be

made mainly on the domestic market within the pricing parame-ters and according to the priorities established by Resolution SE Nº 599/07.In Peru, following the evaluation of 24 exploratory blocks off ered by Perupetro, the Company select-ed, bid for and won Bloque 174 in November 2010. Tecpetrol Lote 174 S.A.C. was set up as the corporate vehicle for this new operation. The area in question is part of the same oil system developed originally by Camisea (Peru) and lies just 120 km to the north of this fi eld. The contract awaiting signature concerns exploration and exploi-tation activities aimed at discover-ing and producing hydrocarbons in the area covered by the contract. The Company will enjoy owner-ship rights over the hydrocarbons extracted, while Perupetro S.A. will act as supervisor. The explo-ration period is expected to last 7 years and is divided into 5 phases.


If a discovery is made, the total du-ration of the contract will be ex-tended for a further 30 or 40 years, depending on whether oil or as-sociated gas is found, respective-ly. As of the date of the current Consolidated Annual Accounts, the Company is waiting on the Peruvian government to issue the award decree.Furthermore, the Camisea op-erations are expected to con-tinue in Bloque 88 (San Martín and Cashiriari), and in Bloque 56 (Pagoreni), which have been sup-plying 100% of the requirements of Perú LNG S.R.L. (PLNG), reaching 620 MMcf/d since June 2010, when the company began commercial operations. Additionally, as part of the Full Exploration Plan, the drill-ing program in Mipaya, Bloque 56, is under way, as drilling at Mipaya X-1001D was completed in May 2011, belonging to Bloque 56. Work is continuing on the second expan-sion phase in Bloque 88 with the aim of increasing plant capacity by 520 MMcf/d. On May 13, 2010, the subsidiary COGA and PLNG signed the “Gas Pipeline Maintenance Contract” which sets out the scope of ser-vices to be provided by COGA in order to maintain the 34” PLNG Gas Pipeline running from Chiquintirca near Ayacucho to PLNG’s plant in Pampa Melchorita (Peru). The contract came into ef-fect on June 1, 2010, and its ap-plication period lasts 36 months, which may be extended by further 36-month periods subject to agree-ment by both parties.

On May 27, 2010, the Ministerio de Energía y Minas de Perú and TgP signed an addendum to the BOOT concession contract for natural gas carriage, in which TgP undertook to expand the gas transport system in a phased plan to reach a capaci-ty of 920 MMcf/d of regular service. In Mexico, an investment cam-paign was carried out during 2010 with a drilling rig as part of the Misión Block contract. To-date, fi ve wells have been drilled, three of which are exploratory, and the plan for the rest of the year is to drill a further ten development wells and two exploratory wells. The strategy envisaged seeks to es-tablish a balance between the de-velopment of existing fi elds and the search for new reserves in the form of exploratory projects, which strengthen the possibili-ty for future developments in the block. A further ten workovers are planned for 2011, while work is ex-pected to continue on building the facilities in the Misión, Santa Anita, Cali and Arcabuz fi elds. As regards production, increases of over 250% have been achieved for gas and over 550% for liquids since the start of the contract. At a busi-ness level, during the period from 2004 to 2010, over US$ 500 million (EUR 375 million), have been in-vested, equivalent to 38,922 work units, 378% over the minimum in-vestment commitment for the fi rst seven years.


BOS has fi nalized the fi rst stage of the geosciences and production studies and presented these to PEP, as they will be used to defi ne and establish the future development of the Coyotes fi eld. Furthermore, 85 well interventions have been carried out and the idea is to con-tinue the campaign during the rest of 2011. During the month of May, the fi rst horizontal drilling project was carried out and is now await-ing completion. The results of the well will determine the viabili-ty of continuing with the drilling campaign. The BOS operation in-cludes 156 wells, of which 138 are currently in operation while an-other 18 are awaiting reactivation. Production levels are in the re-gion of 2,650 bbl/d (Barrels per day) which represents an increase of 50% since the start of operations. As for the subsidiary company Norpower S.A., the outlook for this corporation includes continuing to meet contractual obligations as well as executing the works previ-ously defi ned by PEP as well as oth-er additional projects which may be necessary.

In Colombia, a 2D seismic survey covering over 2,000 linear kilome-ters was launched towards the end of 2009. The project concluded in August 2010, having recorded 2008 km in the survey with results of ex-cellent quality. Tecpecol S.A. was thus able to begin processing and interpreting the data obtained to generate the information required to move onto the stage of drilling exploratory wells. The seismic in-terpretation work is expected to continue during 2011, as well as the defi nition of exploratory prospects and the bureaucratic procedures required to obtain environmen-tal permits and other authoriza-tions in order to begin exploratory drilling during the third quarter of this year. For 2011, Tecpecuador S.A. plans to begin drilling the exploratory well Bermejo Este X-1 and to perform four repairs in order to increase production output.In Bolivia, in the Aquío block, the 3D seismic survey was car-ried out along a stretch of 400 km2 which led to the sinking of well AQ X-1001. In February 2010, drill-ing began to a depth of 4,805 me-ters. The well turned out to be a fi nd, and represents an increase in reserves, providing support for the continuity of this structure. As declared by Bolivian President Evo Morales when he announced the fi nd on April 27, 2011, this is the most signifi cant discovery of the last few years. The fi rst fi eld


development phase covers the drilling of three wells and a pro-duction train. As from 2015, out-put is expected to reach some 6.5 MMm3 per day. The reserves discovered in Bolivia belong to the reservoirs along the Huamampampa formation. There is still exploratory potential in deeper reservoirs, such as those in the Santa Rosa and Icla forma-tions, which Tecpetrol de Bolivia S.A. will be investigating with fu-ture wells. The Company continues to ana-lyze new business options in those countries where it is currently op-erating, as well as other countries, in its search for new operations which will allow it to fulfi ll its growth and consolidation strategy.

SUBSEQUENT EVENTSNo events, situations or circum-stances, other than those of public knowledge and mentioned in Note 39 of the Consolidated Annual Accounts, have taken place subse-quent to March 31, 2011, which af-fect or may signifi cantly aff ect the Company’s equity, fi nancial or eco-nomic situation.

OTHER INFORMATIONThe Company does not possess treasury shares. The Company has not incurred any Research and Development costs during the accounting period. The main fi nancial risks and the procedures for their management are explained in Note 3 of the Report attached. Environmental policies are given in Note 2.19 of the Report attached.

35

MEMBERS OF THE BOARD OF DIRECTORSAS OF MARCH 31, 2011

CHAIRMANEduardo A. Ottino

SECRETARYJohn Edward Kiddell

ADVISORMauro Leone Adolfo Rezzonico

ADVISORGonzalo De Benito Fernández

This version of our report is a free translation of the original, which was prepared in Spanish. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

AUDITOR’S REPORT ON THE CONSOLIDATED ANNUAL ACCOUNTS

To the Sole Shareholder of Tecpetrol Internacional, S.L. (Sole Shareholder Company)

We have audited the consolidated annual accounts of Tecpetrol Internacional, S.L. (Sole Shareholder Company) (Parent Company) and its subsidiaries (the Group) consisting of the consolidated balance sheet as at 31 March 2011, the consolidated income statement, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity, the consolidated cash fl ow statement and relatednotes to the consolidated annual accounts for the year then ended. As explained in Note 2, the directors of theParent Company are responsible for the preparation of these consolidated annual accounts in accordance with the International Financial Reporting Standards as endorsed by the European Union, and other provisions ofthe fi nancial reporting framework applicable to the Group. Our responsibility is to express an opinion on theconsolidated annual accounts taken as a whole, based on the work performed in accordance with the legislation governing the audit practice in Spain, which requires the examination, on a test basis, of evidence supporting the annual accounts and an evaluation of whether their overall presentation, the accounting principles and criteria applied and the estimates made are in accordance with the applicable fi nancial reporting framework.

In our opinion, the accompanying consolidated annual accounts for 2011 present fairly, in all material respects, the consolidated fi nancial position of Tecpetrol Internacional, S.L. (Sole Shareholder Company) andits subsidiaries at 31 March 2011 and the consolidated results of its operations and the consolidated cash fl owsfor the year then ended in accordance with the International Financial Reporting Standards as endorsed by the European Union, and other provisions of the applicable fi nancial reporting framework.

Without this aff ecting our audit opinion, we draw your attention to the comments in Note 31 to the accompanying consolidated annual accounts with regard to the fact that certain associate companies are operating under unstable economic and regulatory conditions. The audit reports on those companies’ statutory accounting statements for the year ended 31 December 2010 include an uncertainty paragraph concerning the future evolution of those matters. At the date of issue of the present report, we are unaware of what the fi nal outcome of those matters will be or, consequently, the eff ect they could have on the accompanying consolidated annual accounts.

The accompanying consolidated Directors’ Report for 2011 contains the explanations which the Parent Company’s directors consider appropriate regarding the Group’s situation, the development of its business and other matters and does not form an integral part of the consolidated annual accounts. We have verifi ed that the accounting information contained in the consolidated Directors’ Report is in agreement with that ofthe consolidated annual accounts for 2011. Our work as auditors is limited to checking the consolidated Directors’ Report in accordance with the scope mentioned in this paragraph and does not include a review of information other than that obtained from the accounting records of Tecpetrol Internacional, S.L. (Sole Shareholder Company) and its subsidiaries.

PricewaterhouseCoopers Auditores, S.L.

Originally signed by Fernando ChamosaPartner

8 September 2011

PricewaterhouseCoopers Auditores, S.L., Torre PwC, Pº de la Castellana 259 B, 28046 Madrid, EspañaTel.: +34 915 684 400 / +34 902 021 111, Fax: +34 913 083 566, www.pwc.com/es

R. M. Madrid, hoja 87.250-1, folio 75, tomo 9.267, libro 8.054, sección 3ª

Inscrita en el R.O.A.C. con el número S0242 - CIF: B-79 031290

39

Consolidated Annual Accounts as of March 31, 2011

TECPETROL INTERNACIONAL, S.L.(SOLE SHAREHOLDER COMPANY) AND WHOLLY-OWNED SUBSIDIARIES


CONTENTS

Consolidated Statement of Financial PositionConsolidated Income StatementConsolidated Statement of Comprehensive Income Consolidated Statement of Changes in EquityConsolidated Cash Flow StatementNotes to the Consolidated Annual Accounts

1. General information2. Summary of the main accounting policies used2.1. Basis for preparation2.2. Principles of consolidation2.3. Foreign currency transactions 2.4. Property, plant and equipment2.5. Intangible assets2.6. Interest costs2.7. Impairment losses on non-fi nancial assets2.8. Financial instruments2.9. Derivative fi nancial instruments and hedging activities2.10. Inventories2.11. Share capital2.12. Current and deferred income tax2.13. Employee benefi ts2.14. Provisions2.15. Revenue recognition2.16. Cost of sales2.17. Employees’ share of profi ts as established by law2.18. Dividend distribution2.19. Environment, health and safety at work3. Financial risk management3.1. Financial risk factors3.2. Fair value estimation3.3. Financial instruments by category4. Critical accounting estimates and judgements5. Property, plant and equipment6. Intangible assets7. Investments in associated companies8. Impairment of assets9. Available-for-sale fi nancial assets 10. Derivative fi nancial instruments11. Trade and other receivables12. Inventories

424343444647

47474749515354545555585959596061616162626263636668697274747576777980

41

80

81818282

83

84858892949596969697989999

102106108108110

115115116

13. Other fi nancial assets at fair value through profi t or loss 14. Cash and cash equivalents15. Share capital and share premium16. Legal reserves17. Currency translation diff erences and revaluation reserves18. Availability of and restrictions on cumulative reserves and earnings19. Trade and other payables 20. Borrowings21. Deferred income tax22. Retirement benefi t programs and other plans 23. Provisions and other liabilities 24. Net sales and operating costs 25. Selling expenses26. Administrative expenses27. Labor costs28. Financial results29. Income tax30. Contingencies31. Situation of associates: Transportadora de Gas del Norte S.A. and Transportadora de Gas del Mercosur S.A.32. Main guarantees, commitments and restrictions33. Balances and transactions with related parties34. Transactions with sole shareholder35. Business combinations36. Subsidiaries, jointly-controlled entities, joint ventures and UTEs37. Audit fees38. Remuneration of the members of the Board 39. Subsequent events

Management Report and Consolidated Annual Accounts as of March 31, 2011


CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Amounts given in Euros unless otherwise indicated)

Note

5

6

21

13

9

7

10

11

12

10

11

14

15

15

16

17

18

20

21

22

23

19

20

10

23

ASSETS

LIABILITIESAND NET EQUITY

2010

515,087,752

8,574,651

8,255,347

6,296,296

42,533,467

27,444,310

-

56,928,962

150,775

665,271,560

17,668,060

-

103,775,436

72,145,533

193,589,029

858,860,589

12,770,000

233,831,372

2,554,000

(84,403,217)

(25,728,896)

285,055,117

424,078,376

9,269,993

433,348,369

209,255,042

49,162,581

7,518,107

29,175,288

295,111,018

74,736,185

10,212,319

34,517,964

408,795

10,525,939

130,401,202

425,512,220

858,860,589

2011

591,599,711

9,244,606

8,826,251

7,098,093

47,370,339

29,204,340

1,393,498

39,382,820

-

734,119,658

15,247,068

926,222

138,256,273

123,817,390

278,246,953

1,012,366,611

12,770,000

233,831,372

2,554,000

(78,852,862)

-

340,501,812

510,804,322

7,303,598

518,107,920

174,806,171

53,196,569

10,340,888

32,432,182

270,775,810

122,865,305

20,971,276

71,854,030

-

7,792,270

223,482,881

494,258,691

1,012,366,611

Non-current assets

Property, plant and equipment

Intangible assets

Deferred tax assets

Other financial assets at fair value through profit or loss

Available-for-sale financial assets

Investments in associated companies

Derivative financial instruments

Trade and other receivables

Other assets

Total non-current assets

Current assets

Inventories


Trade and other receivables

Cash and cash equivalents

Total current assets

Total assets

NET EQUITY

Shareholder capital and reserves

Share capital

Share premium

Legal reserves

Currency translation differences and revaluation reserves

Interim dividends

Retained income, voluntary and other reserves


Total equity

Non-current liabilities

Borrowings

Deferred tax liabilities

Retirement benefit programs and other plans

Provisions and other liabilities

Total non-current liabilities

Current liabilites

Trade and other payables

Current income tax liabilities

Borrowings



Total current liabitilies

Total liabilities

Total equity and liabilities

The accompanying notes 1 to 39 are an integral part of these Consolidated Annual Accounts.

43Consolidated Annual Accounts as of March 31, 2011

CONSOLIDATED INCOME STATEMENT(Amounts given in Euros unless otherwise indicated)

Note

24

24

25

26

28

28

28

7

29

2010

441,067,603

(269,873,916)

171,193,687

(6,720,454)

(27,686,831)

(6,868,259)

6,257,683

(3,219,434)

132,956,392

1,816,910

(3,453,032)

(1,952,682)

2,823,375

132,190,963

(31,720,753)

100,470,210

98,894,415

1,575,795

2011

546,067,785

(338,067,300)

208,000,485

(7,073,758)

(41,229,262)

(20,874,377)

1,194,611

(7,929,097)

132,088,602

2,975,210

(10,245,927)

1,150,719

2,036,678

128,005,282

(46,773,915)

81,231,367

81,175,591

55,776

Net sales

Operating costs

Gross profit

Selling expenses

Administrative expensives

Exploration costs

Other operating income

Other operating expenses

Operating profit

Interest income

Interest net financial results

Other net financial results

Income from investments in associated companies

Income before tax

Income tax

Profit for the year

Attributable to:




Year ended March 31,

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Amounts given in Euros unless otherwise indicated)

Note

9

21

2010

100,470,210

(23,025,224)

(570,430)

-

(201,180)

(23,796,834)

76,673,376

75,581,756

1,091,620

2011

81,231,367

947,396

1,467,040

2,089,569

1,344

4,505,349

85,736,716

86,725,946

(989,230)

Profit for the year

Other comprehensive income:

Currency translation differences

Changes in the fair value of available-for-sale financial assets

Changes in the fair value of derivatives held as cash flow hedges

Income tax relative to components of other comprehensive income (*)

Other comprehensive income after tax

Total comprehensive income for the year

Attributable to:



(*) Related to changes in the fair value of minority interests.




CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Amounts given in Euros unless otherwise indicated)

Legal reserves

2,554,000

-

-

-

-

-

-

-

-

-

-

2,554,000

-

-

-

-

-

-

-

-

-

2,554,000

Share premium

235,183,780

-

-

-

-

-

-

-

-

(1,352,408)

(1,352,408)

233,831,372

-

-

-

-

-

-

-

-

-

233,831,372

Share capital

12,770,000

-

-

-

-

-

-

-

-

-

-

12,770,000

-

-

-

-

-

-

-

-

-

12,770,000

Balance as of March 31, 2009

Comprehensive income

Profit for the year

Other comprehensive income

Currency translation differences (Note 17)

Fair value of available-for-sale financial assets (Notes 9 and 17)

Income tax related to the fair value of available-for-sale financial assets (Notes 17 and 21)

Total other comprehensive income


Transactions with owners

Income from share purchases in subsidiaries

Profit distribution (Note 18)

Dividends paid in cash (Note 18)

Total transactions with owners


Comprehensive income

Profit for the year


Currency translation differences (Note 17)

Fair value of available-for-sale financial assets (Notes 9 and 17)

Fair value of derivatives held as cash flow hedges (Note 17)

Income tax related to the fair value of available-for-sale financial assets (Notes 17 and 21)

Total other comprehensive income


Transactions with owners

Profit distribution (Note 18)

Dividends paid in cash (Note 18)

Total transactions with owners




Voluntary reserves

4,271

-

-

-

-

-

-

949,918

(431,622)

518,296

522,567

-

-

-

-

-

-

12,257,996

-

12,257,996

12,780,563

Accumulated translation differences

(77,972,612)

-

(22,541,049)

-

-

(22,541,049)

(22,541,049)

-

-

-

-

(100,513,661)

-

1,992,402

-

-

1,992,402

1,992,402

-

-

-

(98,521,259)

Revaluation reserves

16,882,054

-

-

(570,430)

(201,180)

(771,610)

(771,610)

-

-

-

-

16,110,444

-

-

1,467,040

2,089,569

1,344

3,557,953

3,557,953

-

-

-

19,668,397

Other reserves

2,265,787

-

-

-

-

-

-

297,409

-

-

297,409

2,563,196

-

-

-

-

-

-

-

-

-

2,563,196

Interim dividends

(17,132,198)

-

-

-

-

-

-

-

17,132,198

(25,728,896)

(8,596,698)

(25,728,896)

-

-

-

-

-

-

25,728,896

-

25,728,896

-

Retained earnings income

201,157,055

98,894,415

-

-

-

-

98,894,415

-

(18,082,116)

-

(18,082,116)

281,969,354

81,175,591

-

-

-

-

81,175,591

(37,986,892)

-

(37,986,892)

325,158,053


9,330,782

1,575,795

(484,175)

-

-

(484,175)

1,091,620

-

-

(1,152,409)

(1,152,409)

9,269,993

55,776

(1,045,006)

-

-

-

(1,045,006)

(989,230)

-

(977,165)

(977,165)

7,303,598

Total equity

385,042,919

100,470,210

(23,025,224)

(570,430)

(201,180)

(23,796,834)

76,673,376

297,409

-

(28,665,335)

(28,367,926)

433,348,369

81,231,367

947,396

1,467,040

2,089,569

1,344

4,505,349

85,736,716

-

(977,165)

(977,165)

518,107,920

Attributable to Company shareholders


CONSOLIDATED CASH FLOW STATEMENT (Amounts given in Euros unless otherwise indicated)

Note

5

29

7

22

5

35

7 and 9

18

14

14

2010

100,470,210

61,214,156

31,720,753

-

3,150,155

(2,823,375)

1,923,627

-

(16,298,371)

(2,152,401)

297,409

(1,636,584)

(40,224,602)

(464,355)

(4,326,154)

(284,989)

(1,004,592)

33,137

(395,711)

(9,955,206)

119,243,107

(65,181,841)

4,322,028

(44,895,386)

(150,775)

-

974,557

(104,931,417)

93,098,880

(53,215,800)

(27,512,926)

12,370,154

26,681,844

46,916,965

(3,050,855)

70,547,954

2011

81,231,367

71,791,558

46,773,915

(89,619)

718,041

(2,036,678)

4,038,618

(230,151)

(40,334,429)

(5,991,775)

-

(977,165)

(12,043,408)

2,588,345

50,175,379

(683,575)

(1,381,351)

(408,795)

(416,494)

2,562,879

195,286,662

(154,502,365)

15,677,194

-

150,775

(870,884)

2,427,427

(137,117,853)

107,713,467

(117,211,866)

-

(9,498,399)

48,670,410

70,547,954

(1,353,582)

117,864,782

OPERATION ACTIVITIESIncome for the year

Adjustments for:

Depreciation and impairment of property, plant and equipment

Current and deferred income tax

Results from sales of property, plant and equipment


Results from investments in associates

Results from retirement benefit plans and others

Results from derivative financial instruments

Results tax payments

Changes in operating assets and liabilities:

Translation differences

Changes in share purchases

Changes in minority interests

Changes in trade and other receivables

Changes in inventory

Changes in trade and other payables

Changes in available-for-sale financial assets

Changes in assets with changes through profit or loss

Changes in derivative financial instruments

Changes in retirement benefit plans

Changes in current debt because of income tax

Cash generated from operation activities

INVESTING ACTIVITIESIncrease in property, plant and equipment

Sale of property, plant and equipment

Acquisition of subsidiary

Changes in other assets

Income from sale of property, plant and equipment

Dividends collected

Cash used for investment activities

FINANCING ACTIVITIESBorrowings

Payment of loans

Dividends payments

Cash generated by (applied to) financing activities

Increase in cash and cash equivalents

Changes in cash and cash equivalents

Cash and cash equivalents less overdrafts at the beginning of the year

Effect of currency translation

Cash and cash equivalents less overdrafts at the close of the year




NOTES TO THE CONSOLIDATED ANNUAL ACCOUNTS (Amounts given in Euros (EUR), unless otherwise indicated)

1. GENERAL INFORMATIONTecpetrol Internacional S.L.U and its wholly-owned subsidiaries (hence-forth known as the “Company”), are principally dedicated to the pur-chase, holding, administration and management of the shares, securities and any other forms of representation of interests in the share capital of non-resident entities, as well as the following activities; the explora-tion, exploitation and development of hydrocarbon fi elds; the transport, transformation, distillation, refi nery, industrial use and sales of hydro-carbons and their by-products. Tecpetrol Internacional S.L.U is incorporated and domiciled in Spain with offi ces at Calle García de Paredes 94, 1°A, 28010, Madrid, Spain. It is registered in the Madrid Companies Register on page M-362494, folio 31, section 8 of Companies’ Volume 20.485.The principles applied in the the elaboration of the Company’s Consolidated Annual Accounts and the consolidation perimeter are giv-en in Note 2.2.The Company is controlled by Tecpetrol International S.A., incorpo-rated in Uruguay, which owns 100% of the Company shareholding. The Company’s ultimate holding company is San Faustín N.V. (see Note 33).

2. SUMMARY OF THE MAIN ACCOUNTING POLICIES USEDThe main accounting policies used to prepare the Consolidated Annual Accounts are given below. The policies have been applied across the board to all the accounting periods detailed in these Consolidated Annual Accounts.

2.1 Basis for preparation The Company’s Consolidated Annual Accounts as of March 31, 2011, have been prepared in accordance with the International Financial Reporting Standards adopted for use by the European Union (EU-IFRS) and ap-proved by European Commission Regulations in eff ect at March 31, 2011. These Consolidated Annual Accounts were drawn up by the Administration Board on June 30, 2011. The administrators will pres-ent these Consolidated Annual Accounts to the Sole Shareholder and it is hoped that they will be approved without modifi cation. The Consolidated Annual Accounts have been drawn up on the basis of historic costs, amended where necessary as required by the EU-IFRS regarding the need for specifi c assets and liabilities to be valued at fair value with variations charged to the Consolidated Income Statement and available-for-sale fi nancial assets. The Company has opted for the following defi nitions in those cases where the IFRS allow for alternative criteria:- Joint ventures are consolidated using the proportional consolidation method


The preparation of the Consolidated Annual Accounts according to EU-IFRS requires the use of certain critical accounting estimates. It also requires Company Management to use its judgment regarding the way in which the Company’s accounting policies are applied. Note 4 details those areas which involve greater degrees of judgment or complexity, or those where hypothe-sis and estimates are relevant to the Consolidated Annual Accounts.

• Standards, amendments and interpretations entering into force during the accounting period closing on March 31, 2011

The application of these standards, amendments and interpretations has not had a signifi cant eff ect on the Company’s fi nancial statements.

• Norms, amendments and interpretations entering into eff ect subsequent to the close of the accounting period on March 31, 2011.

Norm

IAS 1

IAS 18

IAS 27

IAS 36

IAS 39

IAS 39

IAS 7

IFRS 3

Norm

IFRIC 14

IFRIC 19

IAS 1

IAS 24

IAS 27

IFRS 3

IFRS 7

End of first year of application

03/31/2011

03/31/2011

03/31/2011

03/31/2011

03/31/2011

03/31/2011

03/31/2011

03/31/2011


03/31/2012

03/31/2012

03/31/2012

03/31/2012

03/31/2012

03/31/2012

03/31/2012

Title

“Presentation of Financial Statements”. Annual Improvements: 2009

“Ordinary Income”. Annual Improvements: 2009

“Consolidated and Separate Financial Statements”. Revised

“Impairment of Assets”. Annual Improvements: 2009

“Elegible hedged items”. Modification

“Financial Instruments”. Annual Improvements: 2009

“Statement of Cash Flows”. Annual Improvements: 2009

“Business Combinations”. Revised.

Title

“Prepayments of a Minimum Funding Requirement”

“Extinguishing Financial Liabilities with Equity Instruments”

“Presentation of financial statements”.

Annual Improvements: 2010

“Related Party Disclosures”. Revised.

“Consolidated and Separate Financial Statements”.

Annual Improvements: 2010

“Business Combinations”. Annual Improvements: 2010.

“Financial Instruments. Disclosures”. Annual Improvements: 2010


Management is currently analyzing the potential impact of the ap-plication of these standards, amendments and interpretations on the Company’s fi nancial statements. Additionally, at the date of drawing up these annual accounts, the IASB had already published the norms detailed as follows, currently pending adoption by the European Union.

• Comparative informationThe fi gures as of March 31, 2010, given in these Consolidated Annual Accounts for comparative purposes arise from the annual Consolidated Annual Accounts as of this date. However, certain comparative fi gures have been reclassifi ed and modifi ed as a consequence of the defi nitive calculation of the process to allocate the price paid for a business combi-nation in the previous fi nancial year (see Note 35).

2.2 Principles of consolidation (a) SubsidiariesSubsidiaries are entities over which the Company has control as regards the management of fi nancial policies and exploitation activities. This is generally accompanied by a shareholding in excess of one half of the vot-ing rights. When evaluating whether the Company has control over an-other entity, the existence and eff ect of potential voting rights which can be used or converted at that particular point in time are taken into ac-count. Subsidiaries are consolidated as from the date on which control is transferred to the Company and excluded from consolidation when this control ceases.

Norm

IFRS 7

IAS 19

IAS 27

IAS 28

IFRS 10

IFRS 11

IFRS 12

IFRS 13

IFRS 9


03/31/2013

03/31/2014

03/31/2014

03/31/2014

03/31/2014

03/31/2014

03/31/2014

03/31/2014

03/31/2014

Title

“Disclosures -Transfers of financial assets”

“Employee Benefits”. Modification

“Separate Financial Statements”. Modification

“Investments in Associates and Joint Ventures”. Modification

“Consolidated Financial Statements”

“Joint Arrangements”

“Disclosure of Interests in Other Entities”

“Fair Value Measurement“

“Financial Instruments”


The acquisition of subsidiaries by the Company is recorded by applying the acquisition method. The cost of the acquisition is recorded at the fair value of the assets delivered, the equity instruments issued and the liabilities incurred or assumed on the date of the transaction as well as the costs directly attributable to the acquisition itself. The identifi able assets acquired as well as the identifi able liabilities and contingencies assumed in a business combination are initially estimated at fair value on the trade date, independently of the scope of the minority interests. The excess accruing from the acquisition cost over the fair value of the Company’s share of the net identifi able assets acquired is recorded as goodwill. If the acquisition cost is lower than the fair value of the net assets of the subsidiary acquired, the diff erence is recorded in the Income Statement. Inter-company transactions, balances and unrealized gains on transac-tions taking place between companies in the Company are eliminated. The accounting policies of the subsidiaries may be subject to modifi ca-tion when judged necessary in order to conform to the policies adopted by the Company. Details on subsidiaries included in the consolidation perimeter using the global integration method are given in Note 36. The closing date of the accounting period of each company taken into account for the consoli-dation is also provided.

(b) Transactions and minority interestsThe Company applies a policy which considers transactions with minor-ity shareholders as transactions with holders of Company capital instru-ments. As regards minority interest acquisitions, the diff erence between the price paid and the corresponding proportion of the book value of the subsidiary’s net assets is deducted from the net equity value. Profi ts and/or losses arising from the sale of minority interests are also record-ed in equity. The alienation of minority interests, the diff erence between the compensation received and the corresponding proportion of minori-ty shares are also recorded in equity.

(c) Joint ventures and UTEsShares in joint ventures and temporary business unions (Union Temporal de Empresas – UTEs) are included using the proportional con-solidation method. The Company computes on a line-by-line basis its share in the assets, liabilities, income, expenditure and cash fl ow of the entity under joint control in those entries in its statements which are similar. The Company records in its Consolidated Annual Accounts its share in the profi ts or losses arising from the sales of Company assets to entities controlled jointly by the party representing other interests. The Company does not record its share in the profi ts or losses of the entity under joint control arising from the purchase by the Company of assets belonging to the entity under joint control until said assets are sold to an


unrelated third party. However, the transaction is immediately recorded as a loss if it supposes a reduction in the net realizable value of the cur-rent assets or an impairment loss. Details on joint ventures and UTEs included in the consolidation perime-ter using the proportional integration method are given in Note 36.

(d) Associated companiesAssociated companies are those entities over which the Company has signifi cant infl uence but not control, generally accompanied by a share of between 20% and 50% of the voting rights. Investment in associated companies is accounted for using the equity method and initially recog-nized at cost. The investment made by the Company in associated compa-nies also includes goodwill (net of any accumulated impairment loss) identifi ed in the acquisition.Investments in associated companies are reviewed for impairment whenever events or changes in circumstances indicate that their book value may not be salvageable. Impairment loss is recorded as the amount by which the asset’s book value exceeds its salvage value. The recoverable value is the higher of an asset’s fair value less direct sales costs and the current value of estimated future cash fl ows. For the pur-poses of assessing impairment loss, assets are grouped together at the lowest levels for which there are individually identifi able cash fl ows (cash generating units).Unrealized profi ts from transactions carried out between the Company and its associated companies are eliminated according to the percentage stake owned by the Company in the latter. The accounting policies of associated companies will be amended as necessary to ensure they conform to the policies adopted by the Company. Profi t or loss dilution in associated companies is recognized in the Income Statement.Details on associated companies included in the consolidation perimeter using the share method are given in Note 7.

2.3 Foreign currency transactions(a) Functional and presentation currencyThe items included in the annual accounts of each one of the Company’s entities are measured in the currency used in the primary economic en-vironment in which it operates, known as the functional currency. The functional currency of the controlling Company is the US dollar (USD), in which it carries out most of its transactions. However, the annual ac-counts are presented in Euros (EUR), which is the currency used by the controlling Company according to Spanish legislation. The conversion of the Company’s functional currency to its presentation currency was carried out according to the procedures described in (c) as follows.


The functional currency of the Company’s subsidiaries is either their lo-cal currency or the US dollar, in those cases where the main economic and fi nancial transactions take place in US dollars.

(b) Transactions and balancesForeign currency transactions are translated into the functional cur-rency using the exchange rates in force on the dates of the transactions. Foreign exchange profi ts and losses arising from the settlement of such transactions and from the translation at year-end exchange rates of mon-etary assets and liabilities denominated in foreign currency are recorded in the Income Statement under “Other income, net”. Currency translation diff erences on non-monetary entries, such as equi-ty instruments classed as available-for-sale fi nancial assets are disclosed in the Statement of Comprehensive Income under Revaluation reserves. The capital stock account is converted at the exchange rate in eff ect on the date that each capital contribution is made. Legal reserves are con-verted at the exchange rate in eff ect in the month in which they are ap-proved by the shareholders.

(c) Company entitiesThe income and annual accounts of those Company entities whose func-tional currency diff ers from the presentation currency are translated into the presentation currency as follows: (i) The assets and liabilities of the associated and subsidiary compa-

nies are converted at the exchange rate in eff ect at the close of the ac-counting period of each associated and subsidiary company.

(ii) The income and expenditure detailed in each fi nancial statement are converted at the average exchange rate (unless this average fi gure is not a fair approximation of the cumulative eff ect of the exchange rates in eff ect on the dates of the transactions, in which case, income and expenditure are translated on the transaction date itself).

(iii) Any exchange rate diff erences are recorded in a separate section of Shareholders’ equity.


During the consolidation process, any translation diff erences arising from the conversion of a net investment in foreign entities, as well as loans and other instruments denominated in foreign currency designat-ed to hedge these investments, are carried over to the Statement of Comprehensive Income and to Shareholders’ equity. When the invest-ment is sold, the translation diff erences are recognized in the Income Statement as part of the profi t or loss arising from the sale. Adjustments to goodwill and fair value arising in the acquisition of a foreign entity are recognized as assets and liabilities belonging to the foreign entity and are translated using the exchange rate in eff ect at the closing date.

2.4 Property, plant and equipmentExploration and evaluation expenditure is accounted for using the successful eff ort method. Costs are individually accumulated by each block. The acquisition costs related to exploration and evaluation activ-ities are capitalized. Costs associated with exploration are capitalized at the start of the process. However, if the projects are not deemed success-ful on completion and evaluation, the aforementioned costs are entered in the Income Statement for the period in which the non-existence of reserves is defi nitively confi rmed by surveys, technical reports or by drilling extra wells. Depreciation charges are not recorded during the exploration and evaluation phase. The development costs of the blocks in the fi elds are capitalized as property, plant and equipment. These costs include the acquisition and installation of production facilities, development drilling costs, project-related design, the costs involved in acquiring rights and con-cessions related to proved properties and the costs of well abandon-ment, as and when these constitute obligations incurred under specifi c circumstances. The Company considers wells drilled in producing areas for the purpos-es of developing proved reserves to be development wells. The Company considers wells to be exploratory when they are neither development nor service wells, such as injection wells, for instance. Interventions carried out on wells used to develop reserves and/or in-crease production are capitalized and depreciate in terms of their es-timated average useful life. Maintenance costs are charged to income when incurred. The Company periodically reevaluates the remaining useful lives of its tangible fi xed assets in order to manage its amortization plans, particu-larly those directly related to hydrocarbons production.


The depreciation of wells, machinery, equipment and installations has been calculated according to the depletion method based on the proved developed reserves in each area considered as from the month they began production (in the case of exploration wells, machin-ery and equipment) or termination (in the case of development wells and installations). The depreciation of exploitation and association rights has been calculat-ed according to the depletion method on the basis of the cubic meters of hydrocarbons extracted over the total amount of proved reserves considered in each fi eld. Depreciation of the remaining property, plant and equipment is calculated using the straight-line method, applying annual rates as required to write off their values by the end of their estimated useful lives, as follows: • Vehicles up to 5 years• Furniture and offi ce equipment up to 5 yearsThe net carrying value of the fi elds in production and development may be compared with the discounted future net income expected to accrue from the remaining commercial reserves. If it seems unlikely that the amounts recorded at current net value of net future revenues discount-ed at market rates deemed fair for industry will be fully recovered, this is entered as an impairment loss. Exploitation, evaluation and produc-tion assets are reviewed on an annual basis to identify any indicators of impairment.

2.5. Intangible assetsGoodwill represents the excess of the acquisition cost over the fair val-ue of the Company’s share in the net assets identifi ed as belonging to the subsidiary acquired on the trade date. Any good will related to the acqui-sition of a subsidiary is included in “intangible assets”. Goodwill is sub-ject to a recoverability test on an annual basis and is valued on a cost-ba-sis less accumulated impairment losses. Loss through the depreciation of goodwill is not reversible. Liabilities and assets from the sale of an entity include the book amount of goodwill related to the entity sold. Goodwill is assigned to the cash generating unit for the purposes of the recoverability test. The assignation is made to those cash generating units or groups of cash generating units which it is hoped will benefi t from the business combination generating the goodwill.

2.6. Interest costsThe Company does not possess any assets that qualify as interest capital-ization. Interest costs are entered under costs.


2.7. Impairment losses on non-fi nancial assets Assets with an indefi nite useful life, such as goodwill, are not subject to depreciation and are submitted to annual recoverability tests. Assets sub-ject to depreciation are subject to impairment loss assessment if event or changes in circumstances indicate that the value recorded may not be re-coverable. An impairment loss is recognized when the book value of the asset exceeds its recoverable value. The recoverable value of an asset is its fair value less the higher of direct sales costs or its value in use. In or-der to evaluate impairment loss, assets are grouped at the lowest level for which separate cash fl ows may be identifi ed (cash generating units). Non-fi nancial assets other than goodwill which suff er impairment loss are subject to revision to determine a possible loss reversal designation each time the Income Statement is presented.

2.8. Financial instrumentsThe Company classifi es its non-derivative fi nancial instruments into the following categories: at fair value with changes in income, loans and re-ceivables, available-for-sale assets, minority interests and other fi nan-cial liabilities. Classifi cation depends on the nature of the fi nancial assets and the purpose for which they were acquired. The Company determines the classifi cation of its fi nancial assets at the time that they are initial-ly accounted for, and reevaluates their designation each time the Income Statement is presented.

Financial assets(a) Financial assets at fair value through profi t or loss Financial assets at fair value through profi t or loss are those held for ne-gotiation purposes. A fi nancial asset is classifi ed in this category if it is acquired for the main purpose of being sold in the short term, or if so designated by Management. Derivatives are also classifi ed as acquired for use in negotiations, unless they are allocated for hedging purposes. Cash and cash equivalents include cash in hand, deposits, other short-term high-liquidity investments with an original term of three months or less, and overdrafts.

(b) Loans and receivablesLoans and receivables are non-derivative fi nancial assets with fi xed or de-terminable payments that are not quoted on an active market. They are included in current assets, except for maturities greater than 12 months following the balance sheet date on which they were classed as non-cur-rent assets. Loans and receivables are included in trade and other receiv-ables in the balance sheet. Trade and other receivables are initially recognized at fair value and subsequently for their depreciated cost according to the eff ective inter-est method, less the provision for impairment losses. If relevant, a pro-vision for impairment loss arising from depreciation in trade and other


receivables when there is objective evidence that the Company will not be able to collect all the amounts owed according to the original terms of the receivables. Signifi cant fi nancial diffi culties aff ecting the debt-or, the likelihood of bankruptcy or fi nancial restructuring, and failures or delays in payment are taken to be indicators that the receivable has depreciated.

(c ) Available-for-sale fi nancial assets Available-for-sale fi nancial assets are non-derivatives classifi ed in this cat-egory or not classifi ed in any other. They are included in non-current as-sets, unless management intends to sell the investment in the 12 months following the balance sheet date. Investment acquisitions and sales are recognized as of the date of ne-gotiation, meaning the date on which the Company committed to buy or sell the asset. Investments are initially recognized at fair value plus the costs of the transaction for all fi nancial assets not carried at fair val-ue through profi t or loss. Financial assets at fair value through profi t or loss are initially recognized at fair value, and the costs of the transaction are entered in Income. Investments are written off for accounting pur-poses when the rights to receive cash fl ows from the investments have reached maturity or have been transferred, and the Company has sub-stantially transferred all the risks and advantages derived from owner-ship. Available-for-sale fi nancial assets and fi nancial assets at fair value through profi t or loss are accounted for subsequently at fair value. Profi t and loss arising from changes in fair value of the category of fi -nancial assets at fair value with changes in income are recorded in the Income Statement in the accounting period in which they take place. Income from dividends arising from fi nancial assets at fair value with changes in income is recorded in the Income Statement when the Company’s right to receive payment is established. Changes in the fair value of monetary and non-monetary securities clas-sifi ed as available-for-sale are recognized in the Comprehensive Income Statement and in shareholders’ equity. When securities classifi ed as available-for-sale are sold or impaired, the accumulated adjustments at fair value recognized in the Comprehensive Income Statement and in shareholders’ equity are included in the Income Statement.Interests accruing from available-for-sale securities calculated using the eff ective interest method are recognized in the Income Statement for the accounting period in which they take place.The fair value of quoted investments is based on current purchase prices. If the market for a fi nancial asset is not active (and for non-quoted secu-rities), the Company establishes its fair value using evaluation techniques


which include free and recent transactions between interested and duly-informed parties involving other substantially similar instruments; the analysis of discounted cash fl ows, and fi xed-price option models, making the best possible use of market input with as little emphasis as possible on input from the entity itself. On the date of each balance, the Company evaluates whether there is ob-jective evidence that a fi nancial asset or a group of fi nancial assets have suff ered impairment losses. In the case of equity securities classifi ed as available-for-sale, the Company evaluates whether there has been a sig-nifi cant or prolonged drop in the fair value of the securities below cost in order to defi ne whether they have suff ered impairment losses. If there is any evidence of this kind regarding available-for-sale fi nancial assets, the accumulated losses defi ned as the diff erence between the acquisi-tion costs and the current fair value, less any impairment losses of this fi -nancial asset as previously recognized in profi t or loss, are struck from the Comprehensive Income Statement and Shareholders’ equity and recognized in the Income Statement. Impairment losses recognized in the Income Statement regarding equity instruments are not restituted through the Income Statement.

Financial liabilities - Other fi nancial liabilitiesThese include borrowings, trade payables and other debts. Trade payables are initially recorded at fair value, net of the costs in-curred in the transaction. Subsequently, trade payables are valued at de-preciation, and any diff erence between the funds obtained (net of the costs required to obtain them) and the reimbursement value is recog-nized in the Income Statement during the lifetime of the debt according to the eff ective interest method. Trade payables are classifi ed under current liabilities unless the Company has unconditional rights to defer their settlement during at least twelve months following the statement date. Trade payables and other borrowings are initially recognized at fair value and subsequently valued at depreciation using the eff ective interest method.


2.9. Derivative fi nancial instruments and hedging activitiesDerivative fi nancial instruments are originally recorded at fair value on the date that a derivatives contract is signed and subsequently revalued at fair value. The method used to account for the ensuing profi t or loss depends on whether the derivative was designated as a hedging instru-ment and if so, on the specifi c nature of the item hedged. At the start of the transaction, the Company analyzes the relationships between hedging instruments and hedged items, as well as its risk man-agement strategy and objectives for diff erent hedging transactions. The Company also evaluates, both at hedge inception and on a constant basis, the level of eff ectiveness of the derivatives used to hedge transactions in or-der to compensate for changes in fair value or cash fl ows of hedged items. The fair value of a derivative fi nancial instrument is classifi ed as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.

(a) Cash fl ow hedgingThe eff ective portion of changes in the fair value of derivatives des-ignated and qualifying as cash fl ow hedging is recognized in the Comprehensive Income Statement and in shareholders’ equity. Profi t or loss related to the non-eff ective portion is immediately entered in the Income Statement. Cumulative amounts in the Comprehensive Income Statement and shareholders’ equity are carried over to the Income Statement for those periods in which the hedged item aff ects income (for example, when a projected hedged sale takes place). The profi t or loss relating to the ef-fective portion for interest barters hedging variable borrowings is recog-nized in the Income Statement. When a hedging instrument expires or is sold, or when it no longer meets the criteria for hedge accounting, any cumulative profi t or loss in shareholder’s equity until that point remains in equity and is only recognized when the transaction forecast is fi nally recognized in the Income Statement. When a forecast transaction is not expected to take place, the cumulative profi t or loss in shareholders’ equity is immediate-ly carried over to the Income Statement.

(b) Derivatives that do not meet the criteria for hedge accounting Certain derivatives do not meet the criteria for hedge accounting. Variations in the fair value of derivatives that do not meet the criteria for hedge accounting are immediately recognized in the Consolidated Income Statement.


2.10. InventoriesHydrocarbons stocks have been valued at their net realizable value at the end of the accounting period, which is an acceptable criterion in the industry. The net realizable value is calculated on the basis of the sales price of the product, taking into account the destination market, the reference values (generally WTI) and other variables according to the end-user market. Changes in net realizable value are given in Net sales. Supplies and spare parts have principally been evaluated at cost, using the weighted average cost formula. The total amount does not exceed their respective recoverable amounts in the normal course of business. The recoverable values are evaluated at the end of the accounting period, and any appropriate adjustments to values when these are overstated are recorded as charged against income.

2.11. Share capitalOrdinary shares are classifi ed under Shareholders’ equity.

2.12. Current and deferred income taxCurrent income tax is calculated according to taxation laws in force in the countries where the Company operates. Tax charges for the period include current and deferred taxes. The tax is recognized in the Consolidated Income Statement excepting in those cases when it is related to items recognized in the Consolidated Comprehensive Income Statement. In this case, it is recognized in the Consolidated Comprehensive Income Statement. Deferred taxes are calculated using the liability method on the temporary diff erences which may arise between the fi scal bases of assets and liabili-ties and their book value in the Consolidated Annual Accounts. However, if the deferred taxes arise from the initial recognition of an asset or liabil-ity in a transaction other than a business combination which neither af-fects the accounting results, nor profi t or loss at the transaction date, this is not accounted for. Deferred tax is determined according to approved tax rates and laws which are expected to apply when the corresponding deferred tax asset is realized or the deferred tax liability settled.Deferred income tax assets are recognized inasmuch as it is likely that fu-ture tax incentives will be made available to compensate for temporary diff erences.


2.13. Employee benefi ts(a) Defi ned benefi t plans and other long-term programs The Company manages two on-going benefi t plans: “unfunded defi ned benefi ts” and “other long-term benefi ts” which, under certain conditions it has established, are provided over an employee’s working life and after retirement. These are recorded according to current ac-counting standards. The liabilities incurred by these personnel benefi t programs are record-ed at the present value of future cash fl ows and charged during the bene-fi ciaries’ remaining years of service until such time as all conditions gov-erning the vesting period of each benefi t have been met. This liability is calculated by independent actuaries at least once a year using the “pro-jected credit unit” method. Actuarial gains and losses due to adjustments arising from experience and changes in actuarial hypotheses which exceed the higher between the 10% of the value of the assets covered by the plan or 10% of the de-fi ned benefi t plan obligation are charged to the Income Statement dur-ing the expected remaining average working life of the employees. The Company also has a foreign dollar savings account invested abroad which may be used to cover these benefi ts wholly or in part.

(b) Long-term employee retention and incentive program Starting as from this fi nancial period, Tecpetrol International S.A. (the controlling company) is implementing a program designed to retain per-sonnel, off ering long-term incentives for certain employees in specifi c subsidiaries. According to the program, senior executives in certain sub-sidiaries may receive a number of units valued according to the equi-ty book value per Company share (excluding those shares which are not owned by the Company). The units reach maturity over a period of four years and the corresponding subsidiaries must pay up after a period of ten years following the date on which they were awarded, with the op-tion for the employee to request them as from the seventh year onwards, or should he/she be disaff ected from the subsidiary responsible for mak-ing the payment, at the majority equity book value per share of Tecpetrol International S.A. at the date of payment. The benefi ciaries may also re-ceive cash payments equivalent to the dividend paid out per share, each time that Tecpetrol international S.A. makes a cash payment to its shareholders.


2.14. ProvisionsProvisions for well abandonment, restructuring costs and legal claims are recognized when the Company holds current legal obligations as a re-sult of past events and it becomes very probable that a disbursement of funds will be required to settle the obligation and that this amount has been reliably estimated beforehand. In those cases where there are a number of similar obligations, the likeli-hood of disbursement in order to settle the obligation is determined ac-cording to the class of obligations as a whole. Provisions are measured at the current value of the expenditures foreseen as necessary to settle the obligation, using the appropriate discount rate. The Company has recorded the fair value of the liabilities for well aban-donment in the period in which they were incurred. When the liabili-ty was initially recorded, the Company capitalized a cost by increasing the book value of the related asset’s useful extended life. The liability is accreted over time to its present value during each accounting period, while the capitalized cost is depreciated over the estimated useful life of the related asset. In view of interpretations and the application of cur-rent legislation, as well as on the basis of technological developments and changes in the recovery costs required to protect the environment, the Company deems it convenient to carry out a periodic reevaluation of the future costs of well capping. The eff ects of these new calculations are included in the Consolidated Annual Accounts in which they are deter-mined and are refl ected as adjustments to the provision and the corre-sponding Property, plant and equipment.

2.15. Revenue recognitionRevenue comprises the sales of goods and services net of value added tax, withholding tax and discounts, and after eliminating intra-Company sales. Revenue from the sale of hydrocarbons and other assets are recog-nized when all signifi cant risks and compensations related to ownership have been transferred to the buyer. Other revenue is recognized on the basis of accrual. Dividends received are recognized when the right to receive payment is established. Revenue arising from interest is recognized on the basis of the propor-tion of lapsed time using the eff ective interest method.

2.16. Cost of salesCost of sales is recognized in the Consolidated Income Statement on an accrual basis and is classifi ed as “Operating costs”.


2.17. Employees’ share of profi ts as established by law Legislation in force in certain territories where the Company has subsid-iaries establishes that an annual bonus must be paid to employees, calcu-lated on a similar basis to that used for income tax. The share of profi ts due to employees is calculated using the liability method and recorded in “Trade and other payables” in the Consolidated Balance Sheet and the re-sult disclosed in “Labor costs” in the Consolidated Income Statement.

2.18. Dividend distributionThe dividends which Tecpetrol Internacional S.L.U. may distribute among its shareholders are calculated on the basis of its Individual Annual Accounts, rather than on its Consolidated Annual Accounts. The distribution of dividends to the controlling Company sharehold-ers is recognized as a liability in the Company’s Consolidated Annual Accounts for the period in which said dividends are approved by the con-trolling Company’s shareholders.

2.19. Environment, health and safety at workThe Company’s priority objective is to carry out its operations and safe-guard the physical integrity of its personnel and third parties, as well as ensuring that the environment is appropriately protected. Management is committed to this approach and supports the belief that: injuries and occupational illness can be prevented as can any incidents which have a negative impact on the environment; safe practices are the responsibility of each and every member of company personnel training is the base for ensuring continuous improvement in operations, occupa-tional safety and a sound relationship with the environment. The Company applies best practices in the areas of safety and the envi-ronment for the benefi t of the community, Company employees and as a contributing factor for successful business operations. It therefore places its trust on in the ethical and responsible attitude of all its em-ployees at work.In order to carry out its operations, the Company outsources to compa-nies from whom it demands and expects the highest possible standards in the areas of occupation health and safety as well as the protection of the environment, aligned in their totality with the Company’s estab-lished policies and principles. Safe practices and environmental protection are an integral part of tasks, operations and functions and also intrinsic to employment and hiring conditions.


The Company manages its operations with a view to continuous im-provements in safety and environmental protection. Its vision is to achieve the highest operating standards in the industry, respecting those accessible norms and procedures which work as eff ective guide-lines for the Company’s activities as well as for its crisis and emergency response plans. It has, from the outset of its operations, implemented an effi cient Environmental Management System (EMS) to meet its pro-posed objectives and goals, based on the diff erent criteria employed by the leading world Environmental Management Systems. The EMS is im-plemented in all the areas operated by the Company in order to ensure that the environmental protection and conservation standards set by the Company are met at all times. The Company aspires to be a leader in the quality and safety of its operations.

3. FINANCIAL RISK MANAGEMENT3.1 Financial risk factorsThe Company’s activities expose it to a variety of diff erent fi nancial risks. These include market risks (including foreign exchange risks, fair val-ue interest rate risks and price risks) as well as credit and liquidity risks. The Company’s global risk management program focuses on the unpre-dictability of fi nancial markets and seeks to minimize the potentially ad-verse eff ects this could have on the Company’s fi nancial performance. The Company makes use of derivatives to cover certain risks. Risk management is overseen by the Company’s Central Treasury Department in line with the policies approved by the Management Board. The Department identifi es, evaluates and covers fi nancial risks in close collaboration with the Company’s operating units. The Board issues written policies for global risk management as well as for specifi c areas of risk, such as foreign exchange rates, interest rates, liquidity, the use of derivatives and non-derivatives and the risk associated with the invest-ment of excess liquidity.

(i) Foreign exchange rate riskThe Company seeks to neutralize the potentially negative impact arising from fl uctuations in the value of other currencies vis-à-vis its functional currency by using derivatives if necessary. The Company also carries certain accounts payable and receivable in foreign currency as income from its operations. As of March 31, 2011, an appreciation of 5% in the value of the US dollar compared with other currencies would imply an estimated decrease in income of EUR 0.8 million and an estimated increase in income of EUR 1.8 million as of March 31, 2010. The Company does not consider exposure to risk involv-ing other currencies to be relevant.


2011 2010

(ii) Interest rate riskThe Company is exposed to the risk of volatile interest rates. However, its income and cash fl ow are not signifi cantly aff ected by interest rate vari-ations. Risk is kept to a minimum by maintaining excess cash in deposit accounts at fi nancial entities of high repute. Note 20 includes details on the interest rates applicable to borrowings.The following table gives the proportions of debt at variable and fi xed in-terest rates at the end of each accounting period.

If average nominal accumulated interest rates for borrowing maintained during the accounting period had been 50 base points higher, with all other variables being constant, the net income for the accounting peri-od ending March 31, 2011, would have been EUR 1.0 million less (EUR 0.35 million less as of March 31, 2010).The Company has no signifi cant fi nancial assets accrued at a variable rate as of March 31, 2011 and 2010.

(iii) Concentration of credit riskThe Company’s fi nancial assets are potentially exposed to concentrations of credit risk and are mainly comprised of deposits in fi nancial institu-tions and trade accounts receivable. As regards its deposits in fi nancial institutions, the Company is able to reduce its exposition to signifi cant concentrations of credit risk as it maintains its deposits and places cash investments in front-line institutions. As regards trade accounts receiv-able, the Company has put policies in place to ensure that products are sold to clients with a reliable credit rating or a credit letter in its stead. As of March 31, 2011, 64% of the Company’s trade accounts receivable were held with PEMEX (70% as of March 31, 2010), 11% with Esso Petrolera Argentina S.R.L. (12% as of March 31, 2010) and 4% with Y.P.F.S.A..

Amount in Euros

58,313,033

185,459,973

Percentage

12%

88%

Amount in Euros

30,574,698

216,085,503

Percentage

24%

76%

Fixed rate

Variable rate


Under a year

71,854,030

122,865,305

7,399,806

202,119,141

34,517,964

74,736,185

408,795

9,750,920

119,413,864

Between 1 to 2 years

30,592,935

-

5,943,410

36,536,345

71,609,513

-

-

9,207,222

80,816,735


144,213,236

-

5,335,890

149,549,126

137,645,529

-

-

6,469,340

144,114,869

Over 5 years

-

-

-

-

-

-

-

-

-


Borrowings


Non-accrued interests to be paid

Total


Borrowings


Derivative financialinstruments

Estimated non-accrued interests to be paid

Total

(iv) Liquidity riskThe Company maintains suffi cient reserves of cash and securities as well as available funds through its management of an appropriate number of committed credit facilities. The table below analyzes the Company’s fi nancial liabilities which are due to be settled in net groupings by maturities according to the terms pending at the balance sheet date until the maturity date given in the contract:

The Company holds an undrawn credit line for EUR 14.4 million as of March 31, 2011, due in December 2011, and for EUR 4.8 million as of March 31, 2010.

(v) Price riskThe Company periodically evaluates the volatility of the price of crude oil and enters into hedging agreements when necessary as a matter of policy. As of March 31, 2011 and 2010, the Company does not possess any derivatives signifi cantly exposed to price risks. An increase of 10% in the prices of crude oil and petroleum products would imply an approximate increase in the Company’s income of EUR 39 million as of March 31, 2011, and an estimated increase of EUR 25 mil-lion as of March 31, 2010.


As in the previous accounting period, an increase of 10% in crude oil prices would not have any signifi cant material eff ect on the net results of Argentine subsidiaries as they sell on the domestic market according to the regulatory regime in forceThe Company’s derivatives as of March 31, 2011 and 2010, are not signifi -cantly exposed to price risks.

(vi) Capital riskThe Company seeks to maintain an appropriate ratio of debt to total eq-uity considering the industry and the markets in which it operates. The annual debt / total net equity index (in which “debt” refers to all borrow-ings and “equity” is the aggregate of fi nancial loans and equity togeth-er) stands at 0.32 as of March 31, 2011, compared with 0.36 as of March 31, 2010. Both these indicators are well within acceptable levels for the Company as regards its risk policies. The controlling Company is not obliged to comply with regulatory capital maintenance requirements.

3.2 Fair value estimation The fair value of the fi nancial instruments not traded on active markets is determined using valuation techniques. The Company uses a variety of methods and makes assumptions based on the market conditions at the time of each balance sheet date. Quoted market prices or dealer quotes are used for similar instruments related to long-term debt. Other techniques, such as estimated discount-ed cash fl ows, are used to determine fair value for the remaining fi nan-cial instruments. It is assumed that their nominal value less the impair-ment provision of trade receivables is a close approximation of their fair value. The fair value of fi nancial liabilities for the purposes of dis-closure is estimated by discounting the future contractual fl ow at pres-ent market interest rates available to the Company for similar fi nancial instruments.Fair value measurements are broken down into the following hierarchi-cal levels:Level 1 – Reference prices quoted on the markets for identical assets and liabilities.Level 2 – Input diff erent from the reference prices included in Level 1 which may be observed regarding assets and liabilities, either directly (as prices) or indirectly (as price derivatives). Level 3 – inputs for assets and liabilities which is not based on observable market data (non-observable information).


ASSETS AT MARCH 31, 2011

Available-for-sale assets (*)




Total


Available-for-sale assets (*)



Total

LIABILITIES AT MARCH 31, 2010


Total

The following table presents the assets and liabilities measured at fair value at March 31, 2011, and 2010:

(*) The evolution of available-for-sale assets is given in Note 9.

Level 1

-

7,098,093

-

123,817,390

130,915,483

Level 1

-

6,296,296

72,145,533

78,441,829

Level 2

-

-

2,319,720

-

2,319,720

Level 2

-

-

-

-

Level 2

408,795

408,795

Level 3

47,370,339

-

-

-

47,370,339

Level 3

42,533,467

-

-

42,533,467



Trade receivables

Other receivables

Available-for-sale assets

Other assets at fair value through profit or loss



Total


Trade receivables

Other receivables

Available-for-sale assets

Other assets at fair value through profit or loss


Total

3.3 Financial instruments by categoryAccounting policies for fi nancial instruments have been applied to the items given below:

Loans and accounts receivable

130,785,382

25,468,812

-

-

-

-

156,254,194

Loans and accounts receivable

131,583,947

10,622,917

-

-

-

142,206,864

Financial assets at fair value through profit or loss

-

-

-

7,098,093

2,319,720

123,817,390

133,235,203

Financial assets at fair value through profit or loss

-

-

-

6,296,296

72,145,533

78,441,829

Available for sale

-

-

47,370,339

-

-

-

47,370,339

Available for sale

-

-

42,533,467

-

-

42,533,467

Total

130,785,382

25,468,812

47,370,339

7,098,093

2,319,720

123,817,390

336,859,737

Total

131,583,947

10,622,917

42,533,467

6,296,296

72,145,533

263,182,160



Borrowings

Trade payables

Total


Borrowings


Trade payables

Total

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTSEstimates and judgments are continually evaluated and are based on his-torical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.The Company makes estimates and assumptions concerning the future. Actual results may diff er from those estimated under diff erent variables, assumptions or conditions. The most signifi cant estimates and assump-tions are discussed below:

(a) Hydrocarbon reserves Reserve estimates have been prepared by the Company’s technical staff , and are based on technical and economic conditions in force at March 31, 2011, taking into account the economic evaluation over the term of the respective contracts or concessions in order to determine their term of recoverability. The proven hydrocarbon reserves remaining at March 31, 2011, according to the subsidiaries’ stakes in the consolidation perime-ter, amount to an equivalent of 60 million m3.The reserves estimates will be adjusted whenever justifi ed by changes in the aspects considered for their evaluation or at least once a year. These reserves estimates have taken into account those made by hydro-carbon consultants.

Financial liabilities at fair value through profit or loss

-

-

-

Financial liabilities at fair value through profit or loss

-

408,795

-

408,795

Other financial liabilities

246,660,201

122,865,305

369,525,506

Other financial liabilities

243,773,006

-

74,736,185

318,509,191

Total

246,660,201

122,865,305

369,525,506

Total

243,773,006

408,795

74,736,185

318,917,986


Reserves are taken to mean the volumes of oil and gas (expressed in oil-equivalent cubic meters) which generate or are associated with revenue in the areas where each subsidiary operates or has a direct or indirect share interest and for which it owns exploitation rights. This includes hydrocarbons volumes related to the service contracts in which the sub-sidiaries have neither ownership of the reserves nor of the hydrocarbons extracted, as well as those volumes which are estimated will be produced for the contracting party under the works contracts. There are numerous issues which generate uncertainty as to the calcula-tion of proven reserves, of future production profi les, development costs and prices, including diverse factors which are beyond the producer’s control. Reserve engineering is a subjective process which estimates the underground accumulation of crude oil and natural gas which cannot be accurately measured. The calculation of reserves is carried out on the basis of the quality of geological and engineering data available on that date and its interpretation. The proven reserves developed and no-developed of hydrocarbons estimat-ed as of March 31, 2011, according to the Company’s stake, are as follows: Oil – m3 million 16Gas – m3 thousand million 44The reserves given above consist of proven reserves, liable to be extracted, from which the corresponding royalties have not been deducted.

(b) Well-abandonment provisionThe liabilities related to the plugging of wells once operations have fi -nalized are signifi cant. Estimating future abandonment costs is diffi -cult and requires management to make estimates and judgments as most of the obligations will be liable much further ahead in the future. Technologies and costs are also constantly changing as well as political, environmental, safety and public relations considerations. The Company has adopted the following criterion for recognizing well-abandonment related costs: The present value of future costs necessary for well-abandonment is cal-culated for each area on the basis of a cash fl ow discounted at an appro-priate interest rate.The present value determined is recognized as an opening asset and lia-bility balance. Liabilities are adjusted at the interest rate applicable on the original transaction date while assets are depreciated using the units of production method taking into account developed proven reserves and production for the fi nancial year.


Adjustments to future plugging costs, if any, are recorded following the same criteria as for the initial estimate. The liabilities recognized are based upon estimated future abandonment costs, wells subject to aban-donment and the time to abandonment. (See Notes 5 and 23).

(c) ContingenciesThe Company and its subsidiaries are subject to various claims, lawsuits and other legal proceedings including customer claims in which a third party is seeking reimbursement or indemnity. Liability with respect to such claims, lawsuits and other legal proceedings cannot be estimated with certainty. Periodically, the Company reviews the status of each sig-nifi cant matter and assesses potential fi nancial exposure. If the poten-tial loss from the claim or proceedings is considered probable and the amount can be reasonably estimated, liability is recorded. Management estimates the amount of such a liability based on the information avail-able and the assumptions and methods it considers to be appropriate, in accordance with IFRS provisions. Provisions for such contingencies re-fl ect a reasonable estimate of the losses to be incurred based on the infor-mation available and a combination of litigation and settlement strate-gies as of the date of preparation of the annual accounts. These estimates are primarily construed with the assistance of legal counsel. As addition-al information becomes available, the Company will reassess its evalua-tion of the pending claims, lawsuits and other proceedings in order to re-vise its estimates.Provision for contingencies refl ects a reasonable estimate of the losses to be incurred, based on the information available to management at the time when the annual accounts were drawn up.

(d) Recoverable values of non-current assets In order to evaluate the recoverability of non-fi nancial assets, these are grouped at the lowest levels for which there are individually identifi able cash fl ows (cash generating units). Each associated company is consid-ered as a cash generating unit for these purposes.


Cost

Value at beginning of year


Increase

Decrease

Value at year-end

Depreciation

Accumulated depreciationat beginning of year


Depreciation during year and impairment (1)

Decrease

Accumulated depreciation at year-end


5. PROPERTY, PLANT AND EQUIPMENT

(1) Includes the reversal of the devaluation of accounted-for development assets

in the subsidiary Tecpecuador S.A. of EUR 3 million.

Exploration and evaluation

24,160,671

(2,441,331)

33,215,725

(518,936)

54,416,129

-

-

-

-

-

54,416,129

Well abandonment

12,850,504

(999,266)

872,218

(2,000,645)

10,722,811

9,392,715

(719,246)

(374,847)

-

8,298,622

2,424,189

Machinery and equipment

308,526,725

(6,381,029)

7,699,252

(56,036)

309,788,912

138,013,696

(11,409,728)

16,409,848

(57,435)

142,956,381

166,832,531

Development/ productive assets

604,477,443

(41,995,695)

102,742,252

(11,564,450)

653,659,550

423,080,901

(38,271,921)

55,005,752

-

439,814,732

213,844,818

Reserves acquired

128,628,027

10,049,965

-

-

138,677,992

-

-

-

-

-

138,677,992

Others

13,541,631

(520,801)

9,972,918

(911,924)

22,081,824

6,609,937

(405,105)

750,805

(277,865)

6,677,772

15,404,052

Total

1,092,185,001

(42,288,157)

154,502,365

(15,051,991)

1,189,347,218

577,097,249

(50,806,000)

71,791,558

(335,300)

597,747,507

591,599,711


Cost

Value at beginning of year


Increase

Increase due to business combinations (See Note 35)

Decrease

Value at year-end

Depreciation

Accumulated depreciation

at beginning of year


Depreciation during year and impairment

Decrease

Accumulated depreciation at year-end


(*) The reserves acquired are incorporated into the consolidation perimeter as a con-

sequence of the acquisition of Erskine Energy Production Co mentioned in Note 35.

These have been valued at recoverable value.

Exploration and evaluation

9,326,750

(567,420)

13,196,704

2,204,637

-

24,160,671

-

-

-

-

-

24,160,671

Well abandonment

14,383,814

(736,773)

(796,537)

-

-

12,850,504

9,106,807

(480,268)

766,176

-

9,392,715

3,457,789

Machinery and equipment

303,064,402

(12,955,970)

18,428,598

-

(10,305)

308,526,725

125,773,940

(6,670,113)

18,909,869

-

138,013,696

170,513,029

Development/ productive assets

606,797,142

(31,441,008)

32,779,711

-

(3,658,402)

604,477,443

401,708,067

(19,218,399)

40,591,233

-

423,080,901

181,396,542

Reserves acquired (*)

-

-

-

128,628,027

-

128,628,027

-

-

-

-

-

128,628,027

Others

13,252,281

(631,750)

1,573,365

191,970

(844,235)

13,541,631

6,145,180

(291,207)

946,878

(190,914)

6,609,937

6,931,694

Total

946,824,389

(46,332,921)

65,181,841

131,024,634

(4,512,942)

1,092,185,001

542,733,994

(26,659,987)

61,214,156

(190,914)

577,097,249

515,087,752


2011

27,444,310

1,467,259

2,036,678

(1,743,907)

29,204,340

InsuranceThe Company as a whole has taken out a number of insurance policies against the risks to which property, plant and equipment are exposed. The coverage provided by these policies is judged to be suffi cient.

6. INTANGIBLE ASSETSAs explained in Note 35, on March 25, 2010, the subsidiary Burgos Oil Services S.A. de C.V. acquired 100% of the stake in the company Erskine Energy Production Co. The value of EUR 8,574,651 assigned to goodwill arises from the distribution of assets and liabilities acquired in relation to the amount paid for the acquisition. Variations in the balance as of March 31, 2011 correspond solely to currency translation diff erences aris-ing during the fi nancial year. The Company uses the discounted cash fl ow technique to evaluate the recoverability of goodwill. The main premises used were a discount rate of 9.6%, and price estimates according to the futures curve current at the close of the accounting period, using publicly-available information pro-vided by agencies. The result of this estimate revealed that no devalua-tion of the assets tested was necessary.

7. INVESTMENTS IN ASSOCIATED COMPANIES

At the beginning of the year


Result of investments in associates companies

Dividends collected

At the end of the year

2010

27,510,146

(2,199,643)

2,823,375

(689,568)

27,444,310


8. IMPAIRMENT OF ASSETSThe Company analyses the recoverability of its long-term assets on a peri-odic basis, or when events or changes in circumstances indicate possibil-ities of impairment. These reviews are carried out in accordance with the criteria given in Note 2.8.The recoverable value of assets is estimated by the Company as the high-er between the fair value of the assets less the direct sales costs and user value of the assets measured on the basis of the discounted fl ow of funds derived from each cash generating unit (CGU). A discount rate is applied which refl ects the country risk prevalent where the CGU operates.The determination of the discounted fl ow of funds involves a series of es-timates and informed assumptions, such as the evolution of hydrocar-bons production levels, sales prices, the evolution in the WTI (Western Texas Intermediate) future price curve, infl ation, exchange rates, costs and other outfl ows, employed in order to make the best estimate of these which the Company can use to manage the future of its operations.

The associates are as follows:

(*) Constituted in Argentina

(1) The Company holds an indirect interest of 27.50% in Litoral Gas S.A. through TIBSA

Inversora S.A.

(2) Through Gasinvest S.A., the Company has signifi cant infl uence on TGN, which is

quoted on the Buenos Aires Stock Exchange (Argentina). On March 31, 2011, its

shares were quoted at EUR 0.25 (on March 31, 2010, these were quoted at EUR 0.12).

Latest financial information as of December 31, 2010 (EUR thousands)

Income

-

47,261

-

94,473

51,694

Results

(9)

3,787

(3,875)

23,852

2,788

Liabilities

34

20,585

3,053

414,469

18,486

Assets

641

68,420

34,528

618,054

24,344


7,223,848

12,940,860

5,553,242

12,904

1,713,456

27,444,310


7,747,133

13,748,302

5,987,128

13,296

1,708,481

29,204,340

% share

27.24

30.00

21.79

0.03

29.17

COMPANY (*)

Gasinvest S.A.

TIBSA Inversora S.A. (1)

Transportadora de Gas del Mercosur S.A.

Transportadora de Gas del Norte S.A. (2)

Energy Consulting Services S.A.

Total


The fl ow of funds derived from diff erent CGUs is generally projected for a period covering the existence of commercially-exploitable reserves and is limited to the existence of proved reserves in the period during which the contract or concession is eff ective. Future hydrocarbon prices used are market prices available to the fi nancial community. For associated companies, the discounted future fl ow of funds which the Company could technically receive as a shareholder is taken into account. The discount rates used were between 16% and 21% for 2011 and 2010.- No impairment losses have been recorded as a result of recoverability testing during this accounting period. As of March 31, 2009, due to changes in the regulatory and economic con-ditions which had an infl uence on the Company’s international opera-tions, the Company recognized total asset impairment charges of EUR 41 million corresponding to its operations in Argentina and Ecuador. As a consequence of the evaluations carried out during the current fi nancial period of the value of the assets in question, the reversal of the depreci-ation balance generated by operations in Ecuador was determined. The aforementioned reversal came to EUR 3 million and was recognized in income as of March 31, 2011.

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS

The evolution of fi nancial assets is as follows:

2011

47,370,339

47,370,339

2011

42,533,467

3,369,777

55

1,467,040

47,370,339

Non-current

Non-listed investments



Increases

Charged to other comprehensive income


2010

42,533,467

42,533,467

2010

45,136,839

(2,032,942)

-

(570,430)

42,533,467


Available-for-sale fi nancial assets are made up of minority investments in the following companies: Baripetrol S.A., Oleoductos del Valle S.A., Terminales Marítimas Patagónicas S.A., Compañía Operadora de Gas del Amazonas S.A.C. and Euroamerica Hardwods Technology S.A.During the accounting periods closing on March 31, 2011 and 2010, divi-dends were received of EUR 683,520 and EUR 284,989 respectively. These are recognized in the Income Statement under “Other operating income”.The fair value of unlisted securities as of March 31, 2011 and 2010, is based on a discounted cash fl ow at a rate of 10%. Of the securities men-tioned so far, 95% correspond to fi nancial assets held in US dollars, while the remaining 4% are in Argentine pesos and 1% in Peruvian soles. No de-valuation of these assets has been recorded as of March 31, 2011 and 2010.

10. DERIVATIVE FINANCIAL INSTRUMENTSDuring the current fi nancial period, Tecpetrol Corporation (a subsidiary) signed Natural Gas Swap sales contracts to reduce its exposure to the risk of increases in spot oil and natural gas market rates. The counter-part for these contracts is Tecpetrol International S.A. (controlling com-pany). The contracts are monthly and are programmed to coincide with the monthly output of gas volumes equivalent to MMbtu (millions of British thermal units). The operation will be closed each month with a cash payment according to a fl oating price. The Company has designat-ed its sales contracts as derivative fi nancial instruments to hedge cash fl ow at March 31, 2011. A summary of the contracts as of March 31, 2011, is given below:

Total volume

2,020,000 MMbtu

2,970,000 MMbtu

Volume remaining

1,850,000 MMbtu

2,710,000 MMbtu

Reference

Tenn Zone 0

Tetco S. Texas

Prices

5.16 – 6.095 / US$ MMbtu

5.14 – 6.09 / US$ MMbtu

Term

April 2011 – December 2014

April 2011 – December 2014

(*) Texas Tennessee Zone 0.

(**) Texas Easter Transmission Corp.


The fair value of the derivative fi nancial instruments (assets) is:

The fair value of the derivative fi nancial instruments at March 31, 2010, was as follows (liabilities):

As of March 31, 2010, the Company had various Non Deliverable Forwards (NDF) contracts signed during the fi nancial year. The main conditions of these are as follows:

There are no other contracts which may be considered as derivative fi -nancial products.

2011

1,393,498

926,222

2,319,720

2011

-

-

Non-current

Current

Currency

US$/DKK

Date

12.02.2009

12.28.2009

02.23.2010

03.05.2010

03.31.2010

2010

-

-

-

2010

408,795

408,795

Buyer

Santa María Financial S.A.




Tecpetrol S.A.

Seller

Tecpetrol International ApS.




Standard Bank S.A.

Contract

Future sales of Danish Kroner

NDF in currency of reference

U$S 353,718

U$S 8,442,397

U$S 288,780

U$S 1,000,329

U$S 5,150,657

Amount

DKK 1,755,643.92

DKK 43,733,304.42

DKK 1,593,343.66

DKK 5,479,600

$ 20,000,000

Rate

4,96

5,18

5,52

5,49

3,88

Date of compensation of the operations

30-Jun-10

30-Jun-10

30-Jun-10

30-Jun-10

30-Apr-10


11. TRADE AND OTHER RECEIVABLES

The fair value of these items does not diff er signifi cantly from their book value.Current trade receivables are for a term of not more than 30 days.All trade receivables are held in the following currencies:

2011

32,865,419

3,505,767

1,121,310

1,890,324

39,382,820

95,845,267

2,074,696

19,841,607

5,247,874

1,161,895

10,740,934

496,116

2,847,884

138,256,273

177,639,093

2011

153,323,122

21,827,654

2,312,553

164,689

11,075

177,639,093

Non-current

Trade receivables

Taxes

Loans and advances to employees

Others

Current

Trade receivables

Trade receivables from related parties (Note 33)

Common receivables

Payables

Receivables from related parties (Note 33)

Taxes

Loans and advances to employees

Other receivables

Total

US Dollars

Argentine Pesos

Mexican Pesos

Venezuelan Bolivars

Euros

2010

48,096,727

2,697,429

1,461,697

4,673,109

56,928,962

81,943,353

1,543,867

5,187,130

1,461,167

1,457,382

9,665,829

379,226

2,137,482

103,775,436

160,704,398

2010

128,801,105

27,957,533

3,744,557

192,071

9,132

160,704,398


The maturity of trade accounts receivable and other non-current receiv-ables is as follows:

12. INVENTORIES

13. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Change in other fi nancial assets at fair value through profi t or loss is as follows:

2011

5,792,852

32,129,394

1,460,574

39,382,820

2011

1,880,935

13,366,133

15,247,068

2011

7,098,093

-

-

7,098,093

2011

6,296,296

(579,554)

1,381,351

7,098,093

Between 1 and 2 years


Over 5 years

Hydrocarbons

Supplies and spare parts

Non-current

Other investments

External bills of the Republic of Argentina

Impairment of external bills of the Republic of Argentina



Increases


2010

30,339,667

25,161,564

1,427,731

56,928,962

2010

2,453,309

15,214,751

17,668,060

2010

6,296,296

972,391

(972,391)

6,296,296

2010

5,573,260

(281,556)

1,004,592

6,296,296


14. CASH AND CASH EQUIVALENTS

The eff ective interest rate on short-term bank deposits during both peri-ods averaged 0.5% for both periods; these deposits have an average matu-rity of 30 days.Cash and cash equivalents and overdraft facilities include the following for the purposes of the Cash Flow Statement:

15. SHARE CAPITAL AND SHARE PREMIUM

As of March 31, 2011 and 2010, the number of ownership interests issued stands at 1,277,000,000 with a nominal value of EUR 0.01 per share. All the shares issued have been paid up. The Company is owned by Tecpetrol International S.A., which owns 100% of the shares. According to the Royal Legislative Decree 1/2010 of June 2, passing the Capital Companies Law, the Company has been registered at the Companies’ Register as a sole proprietorship entity.

2011

61,170,534

62,646,856

123,817,390

2011

123,817,390

(5,952,608)

117,864,782

Share premium

235,183,780

(1,352,408)

233,831,372

Capital stock subscribed

12,770,000

-

12,770,000

Number of shares

1,277,000,000

-

1,277,000,000

Cash at bank and in hand

Short-term bank deposits


Overdraft facilities (Note 20)


Dividend distribution

Balance as of March 31, 2011 and 2010

2010

21,957,884

50,187,649

72,145,533

2010

72,145,533

(1,597,579)

70,547,954

Total

247,953,780

(1,352,408)

246,601,372


16. LEGAL RESERVESLegal reserves, which are EUR 2,554,000 (EUR 2,554,000 as of March 31, 2010) have been endowed according to Article 274 of the Capital Companies Law. The legislation stipulates that, in all cases, a sum equal to 10% of the accounting period’s profi ts shall be destined to this eff ect until such time as the sum reaches at least 20% of the value of the share capital. Legal reserves may not be distributed, and if used to compensate for loss-es when there are no other reserves available or suffi cient for this pur-pose, must be replaced with future profi ts.

17. CURRENCY TRANSLATION DIFFERENCES AND REVALUATION RESERVES

2011

(98,521,259)

17,578,828

2,089,569

(78,852,862)

2011

(84,403,217)

1,992,402

2,089,569

1,468,384

(78,852,862)


Revaluation reserves of available-for-sale financial assetsand minority interests (net of income tax)


Balance at beginning of year



Revaluation reserves of available-for-sale financial assets and minority interests (net of income tax)

Balance at the end of the year

2010

(100,513,661)

16,110,444

-

(84,403,217)

2010

(61,090,558)

(22,541,049)

-

(771,610)

(84,403,217)

Changes in the currency translation diff erences and the revaluation reserves are shown as follows:


18. AVAILABILITY OF AND RESTRICTIONS ON CUMULATIVE RESERVES AND EARNINGSThe proposal to distribute earnings as of March 31, 2011, and other controlling Company reserves to be presented to the Sole Shareholder, as well as the approved distribution of earnings as of March 31, 2010, is shown as follows:

Dividends per corporate interest The controlling Company has not distributed dividends during the ac-counting period closed on March 31, 2011. During the fi nancial year which closed on March 31, 2010, the controlling Company distributed div-idends for a total of EUR 27,512,926, which represents EUR 0.02 per share.

Interim dividendsThe controlling Company has not distributed interim dividends during the accounting period closed on March 31, 2011. During the fi nancial year which closed on March 31, 2010, the controlling Company distributed in-terim dividends for a total of EUR 25,728,896.

2011

58,721,284

58,721,284

58,721,284

-

58,721,284

Distribution base

Profit for the year

Distribution

Voluntary Reserve

Interim dividends

2010

37,986,892

37,986,892

12,257,996

25,728,896

37,986,892


19. TRADE AND OTHER PAYABLES

The fair value of these items does not diff er signifi cantly from their book value.The total amount of Trade and other payables is held in the following currencies:

Information on the payment terms for suppliersLaw 15/2010 of July 5 establishes a maximum payment term of 60 days for companies to pay their suppliers. A temporary payment schedule closing on January 2013 has been established. According to the second tempo-rary disposition of the Law in question, from its date of application until December 31, 2011, the payment terms will be 85 days. As of March 31, 2011, there are no outstanding payments due to suppliers beyond the legally permitted payment terms as given in Law 3/2004.

2011

100,099,601

8,296,797

13,464,063

1,004,844

122,865,305

2011

77,741,832

22,780,203

1,472,383

14,991,587

5,813,263

12,124

53,913

122,865,305

Trade payables

Amounts due to related parties (see Note 33)

Social security and other taxes

Accrued expenditure

US dollars

Argentine pesos

Colombian pesos

Peruvian nuevos soles

Mexican pesos

Venezuelan bolivars

Euros

2010

57,623,559

4,828,926

11,082,581

1,201,119

74,736,185

2010

56,840,684

14,501,152

-

1,320,705

2,048,646

19,424

5,574

74,736,185


20. BORROWINGS

The fair value of these items does not diff er signifi cantly from their book value. Total borrowings as of March 31, 2011 and 2010 include controlling Company secured loans (see Note 32) for a total of EUR 34,036,926 and EUR 26,874,091, respectively.

2011

113,509,139

61,297,032

174,806,171

5,952,608

62,397,190

3,504,232

71,854,030

Non-current

Bank loans

Loans with related parties (see Note 33)

Current

Current account bank overdrafts

Bank loans

Loans with related parties (see Note 33)

2010

90,722,601

118,532,441

209,255,042

1,597,579

29,253,479

3,666,906

34,517,964


Bank loans

Currency

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

US$

Bs

US$

US$

US$

Interest rate

LIBO + 3.50%

LIBO + 1.75%

LIBO + 1.75%

LIBO + 4.5%

LIBO + 4.5%

LIBO + 1.50%

LIBO + 3%

LIBO + 2.75%

LIBO + 1.5%

LIBO + 3%

LIBO + 2.75%

LIBO + 2.20%

LIBO + 3%

LIBO + 1.75%

LIBO + 1.75%

LIBO + 4.5%

LIBO + 4.5%

LIBO + 1.50%

LIBO + 3%

LIBO + 2.75%

LIBO + 1.50%

LIBO + 3%

LIBO + 2.75

28%

1.7%

LIBO + 0.92%

LIBO + 0.85%

2010

67,543,725

8,041,829

3,446,498

844,383

3,831,837

1,266,574

-

-

-

-

5,747,755

90,722,601

3,876,513

-

4,614,128

1,977,484

2,197,409

4,586,808

3,057,872

1,464,940

-

-

-

-

53,991

7,424,334

-

-

29,253,479

2011

73,194,930

3,716,150

1,592,636

19,275,523

9,636,316

170,620

1,800,427

466,386

257,090

2,699,482

699,579

113,509,139

-

750,193

4,968,250

2,129,250

6,113,498

3,056,290

1,110,694

3,501,733

477,597

740,463

2,334,489

318,398

-

2,769,885

19,907,096

14,219,354

62,397,190

Lender

Credit Agricole Corporate and Investment bank

BBVA Banco Continental

Scotiabank Perú

Scotiabank Perú

Banco de Crédito del Perú

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Citibank NYC

Citibank NYC

BBVA Banco Continental

Scotiabank Perú

Scotiabank Perú

Banco de Crédito del Perú

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Bancomer S.A.

Banco Venezolano

Banco Provincia

BBVA NY

Credit Agricole Corporate and Investment bank

COMPANY

Non-current

Tecpetrol Corporation

Tecpetrol del Perú S.A.C.


Tecpetrol Bloque 56 S.A.C

Tecpetrol Bloque 56 S.A.C

Burgos Oil Services S.A. de C.V.



Tecpetrol de México S.A. de C.V.



Current

Tecpecuador S.A.

Tecpecuador S.A.



Tecpetrol Bloque 56 S.A.C.








Tecpetrol de Venezuela S.A.

Tecpetrol S.A.

Tecpecol S.A.

Tecpecol S.A.


Loans with related parties

The maturities of non-current borrowings are shown as follows:

Currency

US$

US$

US$

US$

US$

US$

US$

Interest rate

LIBO + 1.40%

LIBO + 3%

9%

0%

9%

LIBO + 1.40%

LIBO + 1.40%

2010

65,335,132

202,753

10,651,088

42,343,468

118,532,441

3,666,906

-

-

3,666,906

2011

40,473,100

2,428,913

18,395,019

-

61,297,032

3,457,186

46,727

319

3,504,232

Lender


Techint S.A. de C.V.

Tecpetrol International S.A.



Santa María Financial S.A

Santa María S.A.I.F.

COMPANY

Non-current

Tecpetrol Internacional S.L.U.

Norpower S.A. de C.V.

Tecpetrol de Bolivia S.A.


Current



TGT de México S.A. de C.V.

2010

71,609,513

137,645,529

209,255,042

2011

30,592,935

144,213,236

174,806,171




21. DEFERRED INCOME TAX Deferred tax assets and liabilities are compensated for when there exists a legally-enforceable right of compensation for current tax assets against current tax liabilities, and when deferred income taxes are handled by the same fi scal authorities. The entries are composed as follows:

As of March 31, net deferred taxes on income are shown as follows:

2011

1,985,894

6,840,357

8,826,251

35,493,411

17,703,158

53,196,569

44,370,318

2011

40,907,234

(884,585)

(5,195,760)

(915,158)

4,537,930

(1,344)

5,922,001

44,370,318

Deferred tax asset:

– Deferred tax asset recoverable after 12 months

– Deferred tax asset recoverable before 12 months

Deferred tax liability:

– Deferred tax liability recoverable after 12 months

– Deferred tax liability recoverable before 12 months

Balance at beginning of year

Temporary differences:


Provisions

Tax loss


Directly entered in other comprehensive income

Negative taxable income and others

Balance at year-end

2010

186,566

8,068,781

8,255,347

27,181,974

21,980,607

49,162,581

40,907,234

2010

37,293,304

14,583,320

8,732,794

(13,214,887)

(2,464,947)

201,180

(4,223,530)

40,907,234


Negative taxable incomeThe Company’s negative taxable income statement as of March 31, 2011, is shown as follows:

Negative deferred taxable assets pending compensation are recognized on the basis of the likelihood of the corresponding tax benefi ts being re-alized as future tax benefi ts.As of the date of these statements of accounts, the tax loss carryforwards not accounted for - as there is not suffi cient evidence of future taxable income to allow for the recovery of these assets - come to EUR 62 million, of which EUR 19 million correspond to Tecpetrol Corporation, with a 20 year maturity as from the date of the acquisition of this company (see Note 35), and EUR 43 million from other subsidiaries, most of which do not have a prescription date. Tax loss generated in Spain is due as from 2022.

COUNTRY

BOLIVIA

MEXICO

MEXICO

UNITED STATES

SPAIN

Amount in EUR thousands

38,543

67

3,237

18,723

1,030

Prescription

No due-date

10 years as from the accounting period in which the negative taxable income is generated.


20 years


Negative taxable income

383,308,145

1,134,729

55,033,172

26,600,000

1,029,940

Currency of origin

Bolivianos

Mexican pesos

Mexican pesos

US Dollars

Euros

Company




Erskine Energy Production Company



Changes in deferred tax assets and liabilities during the accounting peri-od are shown as follows:

DEFERRED TAX LIABILITIES


Movement for the year (Note 29)




DEFERRED TAX LIABILITIES





Total

49,162,581

194,071

1,344

3,838,573

53,196,569

Total

37,352,356

13,849,605

(2,039,380)

49,162,581

Negative taxable income and Others (*)

(14,272,878)

5,534,858

1,344

(290,441)

(9,027,117)

Negative taxable income and Others

3,402,228

(18,084,667)

409,561

(14,272,878)

Provisions

21,980,608

(6,075,596)

-

1,901,413

17,806,425

Provisions

2,698,408

20,167,362

(885,162)

21,980,608


41,454,851

734,809

-

2,227,601

44,417,261


31,251,720

11,766,910

(1,563,779)

41,454,851

(*) Includes direct charges to other comprehensive income.


DEFERRED TAX ASSETS





DEFERRED TAX ASSETS



Directly charged to other comprehensive income


Saldos al 31 de marzo de 2010

Total

8,255,347

1,270,261

(699,357)

8,826,251

Total

59,052

7,971,908

(201,180)

425,567

8,255,347

Negative taxable income and Others

(742,105)

530,703

127,848

(83,554)

Negative taxable income and Others (*)

-

(646,250)

(201,180)

105,325

(742,105)

Provisions

11,588,028

(879,836)

(911,810)

9,796,382

Provisions

59,052

11,434,568

-

94,408

11,588,028


(2,590,576)

1,619,394

84,605

(886,577)


-

(2,816,410)

-

225,834

(2,590,576)

(*) Includes direct charges to other comprehensive income.


22. RETIREMENT BENEFIT PROGRAMS AND OTHER PLANS

i) Personnel benefi t plansThe main actuarial premises for the Company’s two benefi t plans under the heading of “unfunded defi ned benefi ts” and “other long-term bene-fi ts” are based on real discount rates of 7% and 6% and on a rate of sala-ry increases of 2% and 3% for the accounting periods closing on March 31, 2010 and 2009, respectively. The amounts assigned under these plans are as follows:

Furthermore, as of March 31, 2011, Tecpetrol International S.A. (control-ling company) has a new employee incentive and long-term retention plan explained in greater detail in Note 2.13 (b). The liability which corre-sponds to this program as of March 31, 2011, is EUR 487,298.As disclosed, the total liabilities for retirement benefi t programs and oth-er plans come to EUR 10,340,888 and EUR 7,518,107 as of March 31, 2011 and 2010, respectively.The amounts disclosed in the Consolidated Income Statement are the following:

2011

9,853,590

487,298

10,340,888

2011

14,073,009

(121,316)

(4,098,103)

9,853,590

Personnel benefit plans

Long term employee incentives and retention program

Total

Present value of unfunded liabilities

Unrecognized cost of services rendered in the past

Actuarial gains/losses unrecognized in the accounting period

Net liabilities recognized

2010

7,518,107

-

7,518,107

2010

10,484,412

(139,059)

(2,827,246)

7,518,107


2011

904,342

1,903,458

743,520

3,551,320

487,298

4,038,618

2011

7,518,107

(988,730)

3,740,707

(416,494)

9,853,590

487,298

10,340,888

Current cost of services

Interest

Actuarial losses/gains, net, recognized in the fiscal year

Subtotal

Incentive program (Note 2.13 (b))

Total included in Labor costs (Note 27)


Translation differences

Total expense (*)

Contributions paid

Subtotal

Incentive program (Note 2.13 (b))


2010

574,448

1,037,328

311,851

1,923,627

-

1,923,627

2010

6,274,284

(284,093)

2,053,022

(525,106)

7,518,107

-

7,518,107

The variations in the liabilities disclosed in the Consolidated Balance are the following:

Net liabilities recognized for those benefi ts have been disclosed under the “Retirement benefi t programs and other plans” account, in non-current liabilities, there being no claimable debt at year-end. The charge to income, which comes to EUR 4,038,618 (EUR 1,923,627 as of March 31, 2010) is disclosed “Operating costs” in the Consolidated Income Statement.

(*) Total expenditure includes translation diff erences for EUR 189,387 as of March 31, 2011 (EUR 129,395 as of March 31, 2010) disclosed in “Other fi nancial income, net” in the Consolidated Income Statement.


23. PROVISIONS AND OTHER LIABILITIES

The maturities of provisions for other non-current liabilities are given below:

Variations in provisions for other liabilities occurred in the fi scal year are given below:

The provision related to well abandonment is recognized using an infl a-tion rate of 4.5% and a discount rate of 8.5%.

2011

24,367,582

1,392,454

6,672,146

32,432,182

7,792,270

7,792,270

40,224,452

2011

324,037

2,117,193

29,990,952

32,432,182

2011

39,701,227

(194,816)

1,853,135

(1,135,094)

40,224,452

Analysis of total provisions:

Well abandonment

Tax liabilities

Others

Total non-current

Provision for other contingencies

Total current

Total



Over 5 years



Increases

Decreases


2010

22,024,264

1,797,515

5,353,509

29,175,288

10,525,939

10,525,939

39,701,227

2010

4,787,240

1,256,790

23,131,258

29,175,288

2010

31,930,527

(684,062)

8,934,453

(479,691)

39,701,227


24. NET SALES AND OPERATING COSTS

Distribution of net sales incomeThe Company’s sales income is geographically distributed as follows:

The operating costs are detailed as follows:

Sales income may also be analyzed by product line as shown below:

237,910,168

78,107,212

185,573,748

14,933,457

29,543,200

546,067,785

2011

14,721,245

20,903,358

71,423,634

113,954,477

6,804,796

88,057,847

22,201,943

338,067,300

376,966,249

169,101,536

546,067,785

2011

44%

14%

34%

3%

5%

100%

2011

69%

31%

100%

Argentina

Mexico

Peru

United States

Ecuador

Fees and services

Labor costs (Note 27)

Depreciation of property, plant and equipment

Maintenance costs

Maintenance, storage and shipping

Taxation

Others

Oil

Gas

209,546,229

97,687,402

110,022,895

-

23,811,077

441,067,603

2010

9,221,321

13,414,883

60,835,236

106,448,261

15,398,276

59,837,490

4,718,449

269,873,916

333,144,620

107,922,983

441,067,603

2010

48%

22%

25%

-

5%

100%

2010

76%

24%

100%


25. SELLING EXPENSES

26. ADMINISTRATIVE EXPENSES

27. LABOR COSTS

2011

2,133,707

4,940,051

7,073,758

2011

10,094,157

34,507,226

367,924

57,234

(3,797,279)

41,229,262

2011

20,903,358

34,507,226

55,410,584

45,793,466

5,578,500

4,038,618

55,410,584

Maintenance, storage and shipping

Taxes

Fees and services

Labor costs (Note 27)

Depreciation of property, plant and equipment

Taxes

Recovery of expenses and others

Operating costs (Note 24)

Administrative expenses (Note 26)

Total

Salaries, wages and others

Social security contributions

Retirement benefit programs and other plans (Note 22)

2010

2,506,397

4,214,057

6,720,454

2010

8,251,154

21,031,164

378,920

11,123

(1,985,530)

27,686,831

2010

13,414,883

21,031,164

34,446,047

27,692,391

4,830,029

1,923,627

34,446,047


The Company’s average number of employees is as follows:

2011

2,975,210

(10,245,927)

(7,270,717)

1,150,719

1,150,719

2011

49

592

641

Interest income

Interest expense

Net interests

Other net income / financial expenditure

Other net financial income


Other personnel

2010

1,816,910

(3,453,032)

(1,636,122)

(1,952,682)

(1,952,682)

2010

46

524

570

The number of Company employees at March 31 by category and gender is as follows:

28. FINANCIAL RESULTS

Women

3

120

123

Women

3

98

101

Total

53

639

692

Total

45

546

591

Men

50

519

569

Men

42

448

490


Other personnel

2011 2010


2011

47,847,417

(1,073,502)

46,773,915

2011

128,005,282

(2,793,222)

125,212,060

37,516,449

9,257,466

46,773,915

Current taxes

Deferred taxes – profit (Note 21)

Income before tax

Non-taxable income

Net taxable base

Income calculated at each country’s rate

Income exempt / Non-deductible expenses

Interest charges

2010

25,843,056

5,877,697

31,720,753

2010

132,190,963

(1,953,557)

130,237,406

40,388,002

(8,667,249)

31,720,753

29. INCOME TAX

Income tax before Company tax diff ers from the theoretical amount which would be calculated on the basis of the tax rate applicable in each country, shown as follows:

The weighted average eff ective interest rate applied was 37.4% (2010: 24.5%).

Accounting periods open to inspectionArgentina 2005 to March 31, 2011Peru 2004 to 2010Venezuela 2004 to 2010Ecuador 2003 to 2010Mexico from the date the Company was incorporated until 2010Spain last four years


30. CONTINGENCIES The Company holds contingent liabilities related to the tax claims that arise during the normal course of business. There are no signifi cant lia-bilities arising from contingent liabilities anticipated other than those foreseen (see Note 23). There are certain interpretations made by the supervisory authorities as to the calculation and payment of certain taxes that diff er from the Company’s position. Management does not consider that any signifi cant impact will result from the fi nal resolution of these situations other than that contemplated in these Consolidated Annual Accounts. The Argentine tax controller authority (Administración Federal de Ingresos Públicos – AFIP), has notifi ed the subsidiary Tecpetrol S.A. of a jeopardy assessment amounting to EUR 1.6 million corresponding to income tax, in addition to interests and fi nes, with the argument that the income from certain crude oil derivatives and other deductions for the fi scal years 2000 and 2001 was incorrectly computed and recorded. On July 18, 2006, the company fi led an appeal resulting in a stay of exe-cution with respect to the demand for payment. The Company estimates that the probability of a favorable outcome based on the defense present-ed is high, and that accordingly no provision needs to be set. The Company does not consider that any consequences will arise from the fi nal resolution of the aforementioned situations other than those al-ready taken into account in the current Consolidated Annual Accounts. 31. SITUATION OF ASSOCIATES: TRANSPORTADORA DE GAS DEL NORTE S.A. AND TRANSPORTADORA DE GAS DEL MERCOSUR S.A.TGN operates two main gas pipelines connected to fi elds in the North and Mid-west of Argentina, whose location allows the company to meet the gas needs of the countries in the Southern Cone. The measures adopted by the Argentine Government during 2002 and the situation to-date have substantially altered the legal and contractual conditions of the framework in which TGN conducted its business until 2001. The tariff -freeze, added to the devaluation of the Argentine curren-cy to a third of its value before the end of 2001, caused a substantial im-balance in TGN’s fi nancial and equity structure. This situation led to the company’s temporary inability to meet commitments with its fi nancial creditors and the need to restructure its fi nancial debt. In fact, after four years of negotiations with its fi nancial creditors, TGN was fi nally able to consummate the voluntary restructuring of its fi nancial debt at the end of September 2007.On the other hand, as a result of the resolutions adopted by the Board of TGN on December 11, 2007, and the Ordinary Shareholders’ Assembly held on January 22, 2008, a new Global Program was adopted to issue simple negotiable obligations not convertible into shares for up to US$ 400 million (EUR 300 million) or its equivalent in other currencies in cir-culation at any given moment.


Nonetheless, the deterioration in the fi nancial and economic equation as a result of the ongoing domestic tariff -freeze, combined with a fall in in-come from export transportation due to the lack of available gas and a generalized increase in costs in both Argentine pesos and US dollars, is generating uncertainty about TGN’s future capacity to continue meeting its fi nancial commitments as agreed. In this context, the Board of TGN decided on December 22, 2008, to suspend capital payments and interests on its fi nancial debt. As of 31 December 2009, TGN has outstanding fi nancial debts worth a total of US$ 411.7 million (EUR 309 million). Of these, it has neither met the capital payment requirements of US$ 82.7 million (EUR 62 million) nor interests of US$ 59.49 million (EUR 45 million) nor US$ 7.4 million (EUR 6 million) in punitive interests.Although the decision to suspend the repayments of its fi nancial debt was taken with the explicit purpose of enabling the secure and reliable provision of public natural gas carriage services, preserving the princi-ple of an active company and ensuring equal treatment for all its fi nan-cial debtors, on December 29, 2008, the Argentine Regulatory Gas Entity (Ente Nacional Regulador de Gas - ENARGAS) took the decision to inter-vene for 120 days. This intervention was successively extended and is still in application. It should be noted that TGN has continued to supply pub-lic services as charged and in a normal fashion without aff ecting either customers or users in general in any way. On April 23, 2009, TGN announced the presentation of a swap off er and requested an out-of-court repayment plan (Acuerdo Preventivo Extrajudicial - APE) for the total restructuring of its fi nancial liabilities. This was subsequently improved upon and amended by a new off er and request for out-of-court repayment plan made on September 8, 2009. This off er received an acceptance level in the order of 87.97%; however, the re-structuring process was delayed by the judiciary upon the request of the Argentine Social Security Administration. In mid-July 2010, this confl ict was unblocked but in September 2010, the Attorney-General declared the out-of-court repayment plan to be null and void. This has since been ap-pealed and refuted by TGN. Furthermore, TGN hopes to reach a full understanding with the Argentine Government before re-investing in the assets required to satis-fy the demands of an economy with a projected positive growth. It thus continues to work with the Argentine authorities and is making every ef-fort to return to the path of growth in the shortest time possible.


Transportadora de Gas del Mercosur S.A. (“TGM”) began commercial operations in 2000, in compliance with its contractual obligations to pro-vide YPF S.A. with the capacity to transport up to 2.8 million m3/day of natural gas along TGM’s 24 inch-diameter, 422 km-long pipeline for deliv-ery at the sub-fl uvial frontier between Argentina and Brazil under the river Uruguay near the town of Paso de los Libres in the province of Corrientes. On the base of the norms adopted by the Argentine Government aimed at palliating the eff ects of the energy crisis in the short term, the Subsecretaría de Combustibles (Under-secretariat of Fuels) passed a se-ries of measures suspending the export of certain volumes of natural gas in order to secure domestic supply. As a result, on April 15, 2009, TGM an-nounced the signature of a transport agreement with YPF, which is cur-rently its only source of income. In relation to the recovery of the value of the Company’s stake in the share capital of TGN and TGM, the Company carried out recoverabili-ty tests on those of its assets related to these companies. The hypothe-ses, premises and estimates of future events used to carry out these tests are based on the range of operating and commercial scenarios as re-gards the activities and prices projected by the operating companies themselves. This takes into account the outlook projected by the Group’s Management concerning income tax considerations, scenarios for the perception of dividends arising from these investments and the rate of funding fl ow adjustment.The sum total of these estimates is based on future suppositions and may or not come about. As regards TGM, they may be further aff ected by the uncertainties related to the evolution of its commercial contract, includ-ing economic compensation for the same. The development of the busi-ness is unpredictable in both cases, and hence it is diffi cult to calculate the generation of a future fl ow of funds which would allow the value of the aforementioned assets to be recovered.


32. MAIN GUARANTEES, COMMITMENTS AND RESTRICTIONSThe Company has assumed the following guarantees, commitments and restrictions as of year-end:

a) Corporate guarantees (amounts in US$ millions)

ITEM

Guarantee of 50% of SMB’s obligations

for the debt balance with Bancomer.

Joint guarantee of compliance with the

obligations of Tecpetrol del Perú SAC and

Tecpetrol Bloque 56 SAC under the license

contract to exploit hydrocarbons in Lote

88 and Lote 56.

Due and total compliance with the obliga-

tions of Tecpecuador S.A. regarding the

contract modifying the contract for the

provision of services for the exploration

and exploitation of hydrocarbons in Bloque

Bermejo signed with the Ecuadorian state.

Unconditional guarantee for the

payment of export pre-financing for

Tecpecuador S.A.

Joint guarantee for compliance with the

obligations of Tecpecol S.A. enshrined in

the contract for the exploration and exploi-

tation of hydrocarbons with the Agencia

Nacional de Hidrocarburos de Colombia

(“ANH”) and any damages occasioned by

non-compliance with the same.

To jointly and severally, absolutely and irrevo-

cably guarantee that it will provide Tecpetrol

de Bolivia S.A. with all the technical and finan-

cial resources required for the latter to fully

and appropriately comply with its obligations

pursuant to the contracts for the exploitation

of the Bloques Aquío and Ipati.

Company





Tecpetrol S.A.

Tecpetrol S.A.

Comments

Only executable if non-compli-

ance is due to causes related to

SMB’s performance.

No defined amount.

No defined amount. Replaces

the guarantees issued by Tecpet-

rol S.A. and Tecpetrol Interna-

tional S.A.

Paid up on April 7, 2011.

No defined amount. Paid up and

replaced on April 5, 2011 by a

new guarantee issued by Tecpet-

rol Internacional S.L.U., under

the same conditions.

No defined amount.

Amount

20.66

-

-

7.00

-

-

Beneficiary

Bancomer

Perupetro S.A.

Ecuadorian state

Citigroup Inc.

ANH (**)

YPFB


b) Guarantees for fi nancial entities and insurance companies (amounts given in US$ millions)

ITEM

Compliance with Tecpecol S.A.

investment plan

Compliance with Tecpecol S.A.

investment plan

Due compliance with the obligations

of Burgos Oil Services S.A. de C.V.

arising from the public works contract

signed with PEP.

Due compliance with the obligations aris-

ing from the works contract signed be-

tween Norpower S.A. de C.V. and PEP.

Compliance with Hickman

investment plan.

Compliance with Rio Atuel

investment plan

Company

Tecpecol S.A.

Tecpecol S.A.

Burgos Oil

Services S.A.

de C.V.

Norpower S.A.

de C.V.

Tecpetrol S.A.

Tecpetrol S.A.

Comments


provided unconditional guaran-

tees to Citigroup Inc. so that Ci-

tibank Colombia S.A. could issue

a bank guarantee as requested

by Tecpecol S.A. Between April

and June 2011, the AHN autho-

rized the amounts permitted to

be reduced to US$ 6.82 million.


provided guarantees to HSBC

Colombia S.A. to issue bank guar-

antees as requested by Tecpecol

S.A. In June 2011, the AHN autho-

rized the amounts permitted to be

reduced to US$ 4.08 million.


guarantees the surety policies

provided by Afianzadora Aserta

S.A. de C.V. in favor of PEP for

US$ 9 million.


signed a guarantee for up to

US$ 5 million in favor of HSBC

México S.A. Also, TE&IC S.A.

issued an indemnity in favor of

Tecpetrol Internacional S.L.U. for

up to US$ 2 million.

-

-

Amount

27.40

14.34

7.85

3.09

4.30

4.82

Beneficiary

ANH (**)

ANH (**)

PEP (*)

PEP (*)

Province of Salta

(Argentina)

Province of Mendoza

(Argentina)

Issuer

Citibank

Colombia S.A.

HSBC

Colombia S.A.

Afianzadora

Aserta S.A.

de C.V.

HSBC México

S.A.

CHUBB

Argentina de

Seguros S.A.

CHUBB

Argentina de

Seguros S.A.


ITEM

Compliance with Oran investment plan.

Due compliance with SMB’s obligations

arising from its contract with PEP.

Guarantee covering hidden defects.

Guarantee covering hidden defects.

Company

Tecpetrol S.A.

SMB

SMB

SMB

Comments

-

-

-

-

Amount

2.40

15.07

11.67

1.12

Beneficiary

Secretaria

de Energía of the

Province of Salta,

Argentina

PEP (*)

PEP (*)

PEP (*)

Issuer

CHUBB

Argentina

de Seguros S.A.

HSBC

México S.A.

Afianzadora

Aserta S.A.

de C.V.

Afianzadora

Sofimex S.A.

(*) PEP: Pemex Exploración y Producción

(**) ANH: Agencia Nacional de Hidrocarburos


(c) Other commitmentsRestrictions on the transfer of shares and income distribution

(i) TGNThe Bidding conditions and Transfer Contract impose certain restric-tions on the transfer of TGN shares owned by Gasinvest and on the trans-fer of these shares held by its shareholders. These restrictions mean that Gasinvest may not reduce its share interests in the capital and voting rights of TGN beyond 51% (controlling block of shares) without the prior authorization of the Argentine Gas Regulatory Authority (Ente Nacional Regulador del Gas - ENARGAS). Any transfer, handover or other action which leads to a reduction in the stake of Gasinvest’s original shareholders in said Company’s capital to be-low 51%, including any subscription errors made by the aforementioned shareholders concerning any increase in capital of Gasinvest S.A., may only be considered eff ective following prior approval by ENARGAS. The restrictions are not applicable to transfers eff ected between parties belonging to the same economic grouping, as established in the Bidding conditions. As established in the new fi nancial agreements, TGN may not pay out dividends if it has incurred default or has grounds for default or is un-dergoing a period of adverse events (as defi ned in the contracts) or if said payment exceeds in any accounting period the available basket amount, which is defi ned as available cash and certain ratios between cash fl ows for the period calculated and total fi nancial debt.

Ring-fenced assets• A substantial majority of the assets transferred by Gas del Estado

Sociedad del Estado (“GdE”) to TGN, mostly those included under Gas pipelines, High pressure branches, Compression stations, and Pressure regulator and/or measurement stations have been defi ned in the License as being “essential for the provision of the services licensed”. In accordance with the license awarded for the provision of natural gas transportation public services (“the License”) which grants the exclu-sive right to exploit TGN’s two gas pipelines in the north and center-west of Argentina, TGN is obliged to repair and maintain essential as-sets as well as improve and extend them when necessary according to specifi c standards given in the License. Under no circumstances may TGN dispose of essential assets, encumber, rent or loan them out nor use them for any other purpose than for the provision of transport ser-vices without prior authorization from ENARGAS.


• The new fi nancial agreements established for the purposes of restruc-turing fi nancial debt prohibit TGN from disposing of any assets unless the price negotiated in the sales operation is at least equal to the fair market value of said assets, or at least 75% of the sales price is paid in cash or cash equivalents. Additionally, the funds obtained from the sale of an asset must be used for purchases and/or pre-settle-ments of capital for the corporate bonds swap, unless income from these sales is reinvested in new assets within the twelve months follow-ing the operation.

(ii) TIBSA/Litoral Gas S.A.According to the Bidding conditions included in the public international call for tender for the privatization of Gas del Estado S.E., TIBSA may dis-pose of a portion of the majority shareholding in Litoral Gas if this does not reduce its share in the capital and voting rights of the licensee com-pany to less than 51%. The transfer of this percentage, as with all actions that reduce TIBSA shareholding to an amount below the interest men-tioned, must without exception be subject to prior authorization by the regulatory entity.

(iii) Tecpecuador S.A. Tecpecuador S.A. is committed to investing at least 10% of its net income in the development of the hydrocarbons industry in Ecuador. As of March 31, 2011, the net earnings reinvested by the Company were in excess of 10% of the profi ts earned.

33. BALANCES AND TRANSACTIONS WITH RELATED PARTIESAt the end of the former fi nancial period, the Company’s ultimate con-trolling company was San Faustin N.V, based in Curaçao, which possessed ownership of the Company through other subsidiaries. Rocca & Partners S.A. (“R&P”) owned a signifi cant portion of the voting rights in San Faustin N.V. and had the capacity to exercise their infl uence over issues aff ecting or subject to the votes of San Faustin’s shareholders. In February 2011, the Company was informed of a reorganization in the ownership structure, which had no impact on company ownership, as San Faustín N.V. transferred its domicile from Curaçao to Luxemburg, changing its name in the process to San Faustin S.A.In connection with San Faustin S.A.’s relocation to Luxemburg, R&P set up a private foundation in Germany (“Stichting”) under the name of Rocca & Partners Stichting Administratiekantoor Aandelen San Faustin (“RP STAK”). Currently, RP STAK has enough of a stake in San Faustin S.A. to ensure majority control. RP STAK is not owned by any one person or group of people.


Principal operations with related parties:

Balance at the end of the fi nancial period from sales/purchases of goods or services

Loans

2011

13,830,731

9,291,771

(298,207)

1,030,239

(2,440,749)

-

(49,969)

2011

2,074,696

1,161,895

8,296,797

2011

40,473,100

20,823,932

3,504,232

64,801,264

Other related companies:

Sales of products and services

Purchases of goods

Fees and services

Interest income

Interest loss

Other financial income

Other operating income and expenses

Trade receivables from related parties (Note 11):

Other related parties

Receivables from related parties (Note 11):


Payables to related parties (Note 19):


Loans (Note 20)

Non-current – controlling Company

Non-current – related companies

Current – related companies


2010

7,292,058

4,596,227

(269,419)

775,898

(373,602)

(34,215)

-

2010

1,543,867

1,457,382

4,828,926

2010

52,994,556

65,537,885

3,666,906

122,199,347


Remuneration of Board membersThe total remuneration of the Board Directors and members earned during the fi nancial years ending on March 31, 2011 and 2010, came to EUR 4.53 and EUR 2.45 million, respectively.

34. TRANSACTIONS WITH SOLE SHAREHOLDERThere are no contracts in existence nor have there been any transactions between the controlling company and the sole shareholder Tecpetrol International S.A. (Uruguay).

35. BUSINESS COMBINATIONSOn March 25, 2010, the subsidiary company Burgos Oil Services S.A. de C.V., completed the acquisition of 100% of the share capital of Erskine Energy Production Co., located in Houston, Texas, United States, for EUR 49.4 million, with certain adjustments to be agreed. Erskine Energy Production Co. subsequently changed its name to Tecpetrol Corporation. Tecpetrol Corporation is dedicated to oil and gas exploration, exploitation and production in the south of the state of Texas.The assets and liabilities resulting from the acquisition, which were de-termined provisionally at March 31, 2010, given the proximity of the op-eration to the close of the fi nancial year, were adjusted as of March 31, 2011, according to the purchase method given in IFRS 3 applicable at the trade date, as the Company decided not to apply early IFRS 3 modifi ed in January 2008. The adjustments made to the balances at March 31, 2010 are given below:

Adjustments

(0.1)

(2.1)

6.0

(3.8)

-

-

-

2010

(6.0)

133.1

2.6

(84.8)

44.9

4.5

49.4

Other current assets and liabilities (net) (*)

Property, plant and equipment. Exploration, evaluation and development assets.

Intangible assets – goodwill

Non-current debt

Subtotal

Cash acquired

Total paid in cash

2010 adjusted

(6.1)

131.0

8.6

(88.6)

44.9

4.5

49.4

(*) This does not include the cash balance


The acquisition of Tecpetrol Corporation created goodwill as of March 31, 2010, of EUR 8,574,651, corresponding to the excess of the acquisition cost over the fair value of net assets (Note 6). During this accounting period, the calculations corresponding to the identifi able assets and liabilities acquired were completed, and cer-tain extra liabilities were detected in addition to those considered at the trade date, which are refl ected in the comparative fi gures of the current Consolidated Annual Accounts. The Company commenced consolidation of the balances and income from Tecpetrol Corporation’s operations as from the trade date.If the Tecpetrol Corporation transaction had taken place on April 1, 2009, the pro-forma information for the 2010 fi scal period concerning net sales income would have been in the region of EUR 466 million. These pro-for-ma results have been prepared on the basis of public information and on non-audited accounting records prior to the acquisition.


% 2011

95.98

99.99

99.92

99.92

49.97

100

100

100

100

100

99.92

99.92

99.92

100

100

-

95.98

Date of close

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

31.12.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

Country

Argentina

Venezuela

Mexico

Mexico

Mexico

USA

USA

USA

USA

Ecuador

Peru

Peru

Peru

Mexico

Portugal

Brazil

Denmark

SUBSIDIARIES AND MAIN ACTIVITY

Tecpetrol S.A. (*)

Tecpetrol de Venezuela S.A. (***)

Tecpetrol de México S.A. de C.V. (**)

Burgos Oil Services S.A. de C.V. (**)

Servicios Múltiples de Burgos S.A. de C.V. (1)

Works relating to the development, infrastructure

and maintenance of gas fields.

Tecpandina L.L.C. (*)

Peruvian Energy L.L.C. (*)

Tecpetrol Block 174 L.L.C. (*)

Tecpetrol Operating L.L.C.

Exploration, exploitation and development of oil and gas in South Texas (USA).

Tecpecuador S.A. (*)

Tecpetrol del Perú S.A.C. (*)

Tecpetrol Bloque 56 S.A.C. (*)

Tecpetrol Lote 174 S.A.C. (*)

Techenergy Services S.A. de C.V.

Exploration, exploitation and development of hydrocarbons fields.

Suizum Serviços de Consultadoria Soc. Unip., Ltda.

Consulting technical support in expansion and modernization

of industrial, commercial and of services companies in the

international environment, and participation in other companies.

Tecpetrol do Brasil Ltda. (3) (***)


Commercial and industrial activities, holding of investments

in other companies and administration of funds generated by the Company

% 2010

95.98

99.99

99.92

99.92

49.97

100

100

-

100

100

99.92

99.92

-

100

100

95.98

95.98

36. SUBSIDIARIES, JOINTLY-CONTROLLED ENTITIES, JOINT VENTURES AND UTES


% 2011

94.12

96.08

67.17

98.87

99.96

59.98

100

99.92

Date of close

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

12.31.10

Country

Bolivia

Argentina

Argentina

Colombia

Mexico

Mexico

Uruguay

USA

SUBSIDIARIES AND MAIN ACTIVITY

Tecpetrol de Bolivia S.A. (*)

Dapetrol S.A.

Exploration, discovery, exploitation and sale of gas and liquid hydrocarbons.

GEA – Geo Energy Alternatives S.A.

Exploration, exploitation and development of hydrocarbons fields; transport,

transformation, distillation and industrial development of hydrocarbons and

their byproducts; and trade in hydrocarbons; operation of oil and gas pipelines,

development of projects and the provision of advisory and consulting services

relating to the transport and distribution of energy in general.

Tecpecol S.A.

Exploration, exploitation and development of hydrocarbons fields;

transportation, transformation, distillation, refining and industrial use

of hydrocarbons, sale of hydrocarbons and their by-products, providing

services of operation, maintenance and development of third

party hydrocarbon fields.

TGT de México S.A. de C.V.

Provision of natural gas carriage services.


Carrying out works related to the development, infrastructure

and maintenance of the System 3 gas pipeline.

Tecpower S.A.

Investment activities.

Tecpetrol Corporation. (2)

Oil and gas exploration, exploitation and production in the south

of the state of Texas (USA).

% 2010

94.12

96.08

67.17

96.81

99.96

59.98

100

99.92

(1) This subsidiary is considered to be a jointly-controlled entity whose main activity involves

performing works related to the development, infrastructure and maintenance of gas fi elds.

(2) On April 5, 2010 Erskine Energy Production Co. changed its name to Tecpetrol

Corporation.

(3) The subsididary Tecpetrol do Brasil was sold in March 2011.

(*) Exploration, exploitation and development of hydrocarbons fi elds; transportation, transfor-

mation, distillation, refi ning, industrial use and sale of hydrocarbons and their by-products.

(**) Performance of work works related to the development, infrastructure and maintenance

of gas fi elds.

(***) Provision of services in the area of hydrocarbons, including exploration, exploitation,

transport, manufacture and refi nery.


Entities under joint control

All joint ventures have been consolidated in proportion to the Company’s stake.

(1) Corresponding to Tecpetrol S.A. (Argentina).

(2) In these countries the corresponding governments facilitate the exploitation of their country’s mineral resources by taking advan-

tage of the expertise of a commercial oil and gas entity. The operating entity may only be entitled to recover specifi ed costs plus

an agreed profi t margin. It may have the right to extract resources over a specifi ed period of time.

(3) On January 22, 2011, the amendment contract was signed between the Ecuadorian state represented by the Hydrocarbons

Secretariat and the subsidiary Tecpecuador S.A. adopting the services provision model to explore and exploit hydrocarbons.

The contract was recorded in the register of the Ecuadorian Hydrocarbons Secretariat on February 17, 2011 and is applicable

until July 30, 2019.

Area

See next page

for details

Colón

Colón

Bermejo

Camisea

Misión

Ipati y Aquío (1)

CPO6,CPO7

y CPO13

% 2010

See next page

for details

43.75

-

100

10

50

20

80

% 2011

See next page

for details

43.75

43.75

100

10

50

20

80

COUNTRY

Argentina

Venezuela (2)

Venezuela (2)

Ecuador (3)

Peru

Mexico (2)

Bolivia

Colombia

Duration (years)

See next page for details

20 years

20 years

30 years for oil exploitation and

40 years for gas

20 years

20 years

Aquio:35 years

Ipati: 31 years

24 years since the exploration

discovery

Assignment date

See next page

for details

December 1994

August 1999

December 2000

January 2004

December 1994

May 2007 (Date of

the new contracts)

January 2009

Operator

See next page for details

Tecpetrol de Venezuela S.A.

Suizum Servicos

de Consultadoría Lda.

Tecpecuador S.A.

Pluspetrol Perú

Corporation S.A.

Servicios Múltiples

de Burgos S.A. de C.V.

Total Exploration

Production Bolivia

Tecpecol S.A.


(1) The percentages indicated correspond to the direct and indirect interests held by the

Company at March 31, 2011 and 2010.

(*) The term is calculated as from November 2001 for the fi eld “San Antonio Sur”.

(**) This term is calculated as from July 21, 1992, when the area was awarded to

Glacco S.A.; Tecpetrol S.A., purchased the area from Glacco S.A., on July 1994.

(***) This period will have the duration required to ensure compliance with the obligations

arising from the contract in question.

(****) On April 26, 2010, the return of the Caracol Norte fi eld was signed. On June 1, 2011,

Tecpetrol S.A. signed an agreement to cede its participation in the Tres Nidos Area.

Joint-ventures – Argentina Areas operated by Tecpetrol S.A.

NAME

Agua Salada

Atuel Norte

El Tordillo

Tres Nidos-

El Caracol Norte (****)

Aguaragüe

La Tapera-Puesto Quiroga

Rio Atuel

Assignment date

September

1990

September

1990

June 1991

July 1992

November 1992

July 1994

December 2008

%(1)

70.00

33.34

52.13

65.00

23.00

52.13

33.33

Location

Río Negro

Mendoza

Chubut

Neuquén/

Río Negro

Salta

Chubut

Mendoza

Duration

(years)

25

25

25

25

25(*)

25(**)

(***)


Areas operated by third parties

(*) On June 20, 1996, the due date of the concession was postponed until January 21,

2026.

NAME

Ramos

Assignment Date

January 1991

Participation %

25

Location

Salta

Duration (years)

25(*)

Joint ventures and UTEs: assets and liabilities

2010

9,952,765

142,407,776

79,144

601,955

37,102,396

2,797,184

827,539

1,538,740

701,126

97,796,242

88,471,657

62,913,296

23,381,408

6,110,945

8,879,043

2010

3,928,456

19,024,674

545,396

3,243,055

9,787,110

1,554,623

311,415

1,075,043

220,759

51,578,038

6,220,303

2,455,892

2,985,845

1,412,266

484,125

2011

11,947,466

119,360,979

29,079

1,137,929

28,771,517

2,399,273

941,894

4,633,038

447,023

92,475,330

115,999,125

70,504,292

29,908,273

15,853,525

11,371,363

2011

8,802,238

25,645,864

543,398

3,875,649

8,563,657

447,787

472,932

565,320

241,884

42,944,645

14,673,734

5,342,118

8,911,552

2,131,165

813,797

NAME

ARGENTINA

Agua Salada

El Tordillo

Tres Nidos - El Caracol Norte

Aguaragüe

Ramos

La Tapera – Puesto Quiroga

Atuel Norte

Rio Atuel

VENEZUELA

Colón

MEXICO

Misión

PERU

Bloque 88

Bloque 56

ECUADOR

Bermejo

BOLIVIA

Aquio

Ipati

Assets Liabilities


Joint ventures and UTEs (value in EUR million)

Both Management and the controlling company have no knowledge of any contingent liabilities corresponding to the share of the Company in joint ventures, other than those mentioned in the notes to the current Consolidated Annual Accounts.

37. AUDIT FEESThe fees accrued during the accounting period by PricewaterhouseCoopers (PwC) for auditing services provided to the Group amount to EUR 450,270 (2010: EUR 334,877), of which EUR 19,000 (2009: EUR 18,000) correspond to the fi rm PricewaterhouseCoopers Auditores, S.L. (Spain) and fees for other services provided to the Group by other fi rms under the PwC brand amount to EUR 63,809 (2010: EUR 465,500).

38. REMUNERATION OF THE MEMBERS OF THE BOARDDuring the accounting period which closed on March 31, 2010, the controlling Company has not accrued any charges on behalf of the members of its Board of Administration as salaries, allowances or remu-neration of any kind.The controlling Company has made no loans to its Board members, nor assumed any obligations on their behalf as guarantor.Accordingly, there are no obligations assumed by the controlling Company as regards pensions or insurance premium payments related to the former and current members of this administrative organ.

2011

119.7

407.3

83.5

40.3

469.9

264.9

Total current assets

Total non-current assets

Total current liabilities

Total non-current liabilities

Income

Expenses

2010

82.2

421.2

57.3

52.0

422.3

256.7


Share and charges of the members of the Board of Administration in other analogue companies Article 229 of the Capital Companies Law passed by the Royal Legislative Decree 1/2010 of July 2, obliges administrators to communicate to the Board of Administration or otherwise, to the other administrators, or in the case of a single administrator, to the Board of Directors, any situa-tion of confl ict, whether direct or indirect, which there may be with rela-tion to the Company’s interests. The Administrator aff ected must abstain from involvement in agreements or decisions related to the operation which is the motive for the confl ict. As regards the indications given in articles 229 and 231 Capital Companies Law, the Company administrators must declare that they do not possess any share capital in other companies involved in the same or analogue or generically complementary activity as Tecpetrol Internacional, S.L.U. Similarly, the administrators must also declare that they do not hold any position or responsibility in other companies in-volved in the same or analogue or generically complementary activity as Tecpetrol Internacional, S.L.U.

39. SUBSEQUENT EVENTSNo further events, situations or circumstances have occurred subsequent to March 31, 2011 — other than those mentioned in Notes 32 and 35 and which are of public knowledge — that signifi cantly aff ect or potentially aff ect the Company’s equity, economic and fi nancial position.

117

DRAWING UP OF THE CONSOLIDATED ANNUAL ACCOUNTS AND MANAGEMENT REPORT CORRESPONDING TO THE ACCOUNTING PERIOD CLOSED ON MARCH 31, 2011

At June 30, 2011, the Management Board of the company Tecpetrol Internacional S.L.U., in compliance with the requirements established in Article 253 of the Law of Capital Companies and Article 37 of the Code of Commercial Law, presents the Consolidated Annual Accounts and the Consolidated Management Report corresponding to the accounting period closed on March 31, 2011, comprised of the annexed documents preceding this written statement.

John E. KiddellSecretary

Mauro Leone Adolfo RezzonicoAdvisor

Gonzalo De Benito FernándezAdvisor

Eduardo A. OttinoChairman

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