YPF S.A. — Audit Report / Information 2013

Apr 29, 2014

YPF Holdings, Inc. and Subsidiaries

(A Wholly Owned Subsidiary of YPF S.A.)

Consolidated Financial Statements as of and
for the year ended December 31, 2013
and Comparative Information
Independent Accountants Auditors’ Report

Independent Accountants Auditors’ Report

To the Board of Directors of

YPF Holdings Inc.

1330 Lake Robbins Drive – Suite 300

The Woodlands, Texas, U.S.A.

1. Identification of the financial statements subject to audit

We have audited the accompanying consolidated financial statements of YPF HOLDINGS INC. (incorporated in the United States of America) and its controlled companies (hereinafter, the “Company”), which are expressed in U.S. thousand dollars and comprise the consolidated balance sheet as of December 31, 2013 and the related consolidated statements of comprehensive income, changes in stockholders’ deficit and cash flows for the year then ended and a summary of significant accounting policies and other explanatory information included in their Notes 1 to 8.

The figures and other information as of December 31, 2012 and for the year then ended, are an integral part of these consolidated financial statements and are intended to be read only in relation to those financial statements.

1. Management's Responsibility for the Financial Statements

The Company's Management is responsible for the preparation and fair presentation of the accompanying consolidated financial statements of the Company in accordance with International Financial Reporting Standards adopted by the Argentine Federation of Professional Councils in Economic Sciences (“FACPCE”) as professional financial standards as they were approved by International Accounting Standards Board (“IASB”) and incorporated by the Argentine Securities Commission (“CNV”) to its regulations. Moreover, the Management is responsible of an internal control system as it determines necessary to enable the preparation of consolidated financial statements that are free from material misstatements.

1. Auditors’ Responsibility

Our responsibility is to express an opinion on the accompanying consolidated financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing (“ISA”) adopted by Technical Resolution No. 32 issued by the FACPCE. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures, substantially on a test basis, to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1. Opinion

In our opinion, the consolidated financial statements identified in the first paragraph of section 1 in this report, present fairly, in all material respects, the financial position of YPF HOLDINGS INC. and its controlled companies as of December 31, 2013, and the results of their operations, changes in its stockholders’ deficit and their cash flow for the year then ended, in accordance with International Financial Reporting Standards.

1. Emphasis of matter

As discussed in Note 7 to the accompanying consolidated financial statements the Company is exposed to certain environmental contingencies. Additionally, as it is described in Note 1, as of December 31, 2013 and December 31, 2012, the Company presents shareholders’ deficit and its financial ability to afford its commitments depends on its Parent Company’s financial support or capital contributions.

1. Restriction in use

The consolidated financial statements of the Company as of December 31, 2013, have been prepared for consolidation purposes with YPF’s consolidated financial statements and for its presentation to the CNV in Argentina as mentioned in Note 1 of those consolidated financial statements and should not be used and could not be appropriate for any other purposes.

Buenos Aires City, Argentina

March 7, 2014

Deloitte & Co. S.A.

C.P.C.E.C.A.B.A. T° 1 – F° 3

Guillermo D. Cohen

Partner

Public Accountant – University of Buenos Aires

C.P.C.E.C.A.B.A. T° 233 – F° 73

YPF HOLDINGS, INC. AND SUBSIDIARIES

(A Wholly Owned Subsidiary of YPF S.A.)

TABLE OF CONTENTS

	Page
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR YEAR ENDED DECEMBER 31, 2013 AND COMPARATIVE INFORMATION
Consolidated Balance Sheets	1-2
Consolidated Statements of Comprehensive Income	3
Consolidated Statements of Changes in Stockholder’s Deficit	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6-28

YPF HOLDINGS INC. AND SUBSIDIARIES

(A Wholly Owned Subsidiary of YPF S.A.)

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND COMPARATIVE INFORMATION

(In thousands of dollars)

ASSETS		12/31/2013			12/31/2012
NONCURRENT ASSETS:
Intangible assets:
Mineral interests	$		12.775	$	15.907
Less accumulated amortization – intangible assets			(1.154)		(1.209)
Intangible assets — net			11.621		14.698
Property, plant and equipment:
Proved properties — producing			287.922		263.737
Overriding royalty interest — successful efforts method			7.450		7.450
Non-current inventory			4.040		4.385
Other property, plant, and equipment			15.015		14.065
Total property, plant, and equipment			314.427		289.637
Less accumulated depreciation, depletion, and amortization			(280.412)		(255.608)
Property, plant, and equipment — net			34.015		34.029
Investments and Restricted cash (Note 3. a)			22.376		2.381
Total non-current assets			68.012		51.108
CURRENT ASSETS:
Other receivables and prepayments			2.582		4.741
Accounts receivable			8.045		6.486
Investments and restricted cash (Note 3.b)			5.673		6.346
Cash and cash equivalents			6.596		8.952
Total current assets			22.896		26.525
TOTAL ASSETS	$		90.908	$	77.633

(Continued)

YPF HOLDINGS INC. AND SUBSIDIARIES

(A Wholly Owned Subsidiary of YPF S.A.)

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND COMPARATIVE INFORMATION

(In thousands of dollars)

LIABILITIES AND STOCKHOLDER’S DEFICIT			12/31/2013				12/31/2012
STOCKHOLDER’S DEFICIT:
			---		Common stock, $0,01 par value - 810.614 shares issued		and outstanding
Paid-in contributed capital			170.500				132.500
Accumulated other comprehensive income			1.538				94
Accumulated deficit			(1.127.186)				(994.020)
Net loss			(45.868)				(134.073)
Total stockholder’s deficit			(190.503)				(184.986)
NONCURRENT LIABILITIES:
Environmental and other long-term liabilities (Note 7)			156.516				165.668
Accrued employee benefit plans			26.973				30.506
Asset retirement obligations			24.109				10.083
Total non-current liabilities			207.598				206.257
CURRENT LIABILITIES:
Environmental and other short-term liabilities (Note 7)			47.451				29.538
Asset retirement obligations			9.847
Accrued payroll, employee benefit plans
and related liabilities			4.886				4.740
Other accrued liabilities			5.589				8.865
Accounts payable			6.040				13.219
Total current liabilities			73.813				56.362
TOTAL LIABILITIES			281.411				262.619
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT	$		90.908			$	77.633
See notes to consolidated financial statements.

(Concluded)

YPF HOLDINGS INC. AND SUBSIDIARIES

(A Wholly Owned Subsidiary of YPF S.A.)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2013 AND COMPARATIVE INFORMATION

(In thousands of dollars)

		Year ended December 31,
		2013			2012
REVENUES	$	50.473		$	53.532
COST OF SALES-Production costs		(35.030)			(34.877)
GROSS PROFIT		15.443			18.655
OPERATING EXPENSES:
Administrative and environmental expenses (Note 3.c)		(55.890)			(145.583)
Exploration and dry hole expense		(4.546)			(6.634)
OPERATING LOSS		(44.993)			(133.562)
FINANCE EXPENSES
Gain on assets		15			85
Losses on liabilities		(890)			(596)
LOSS BEFORE INCOME TAXES		(45.868)			(134.073)
INCOME TAX EXPENSE		-			-
NET LOSS FOR THE YEAR FROM CONTINUING OPERATIONS
$	(45.868)		$	(134.073)
OTHER COMPREHENSIVE INCOME
Change in value of available-for-sale securities (2)		1.444			403
Remeasurement of net defined pension benefit liability/ Actuarial Gain (1)		907			3.334
TOTAL COMPREHENSIVE LOSS FOR THE YEAR	$	(43.517)		$	(130.336)

1. Immediately reclassified to accumulated deficit.
2. Will be reversed to net income (loss) at the moment of the sale of the investment.

See notes to consolidated financial statements.

YPF HOLDINGS INC. AND SUBSIDIARIES

(A Wholly Owned Subsidiary of YPF S.A.)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S DEFICIT

FOR THE YEAR ENDED DECEMBER 31, 2013 AND COMPARATIVE INFORMATION

(In thousands of dollars)

	2012
							Other				Total
	Subscribed		Capital				Comprehensive		Accumulated		Stockholders’
	capital		contributions		Total		Income-(Loss)		Deficit		deficit
Balance as of January 1, 2012	810.513		74.000		884.513		(309)		(997.354)		(113.150)
Capital contribution from Parent			58.500		58.500		-		-		58.500
Net loss for the year	-		-		-		-		(134.073)		(134.073)
Other comprehensive income for the year:
- Available-for-sale securities	-		-		-		403		-		403
- Remeasurement of defined pension liability/ Actuarial Gain	-		-		-		3.334		-		3.334
Reclassification – defined pension liability/ Actuarial Gain	-		-		-		-3.334		3.334		-
Balance as of December 31, 2012	810.513		132.500		943.013		94		(1.128.093)		(184.986)
	2013
							Other				Total
	Subscribed		Capital				Comprehensive		Accumulated		Stockholders’
	Capital		contributions		Total		Income-(Loss)		Deficit		deficit
Balance as of January 1, 2013	810.513		132.500		943.013		94		(1.128.093)		(184.986)
Capital contribution from Parent	-		38.000		38.000		-		-		38.000
Net loss for the year	-		-		-		-		(45.868)		(45.868)
Other comprehensive income for the year:
- Available-for-sale securities	-		-		-		1.444		-		1.444
- Remeasurement of defined pension liability/ Actuarial Gain	-		-		-		907		-		907
Reclassification – defined pension liability/ Actuarial Gain	-		-		-		(907)		907		-
Balance as of December 31, 2013	810.513		170.500		981.013		1.538		(1.173.054)		(190.503)

See notes to consolidated financial statements.

YPF HOLDINGS INC. AND SUBSIDIARIES

(A Wholly Owned Subsidiary of YPF S.A.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2013 AND COMPARATIVE INFORMATION

(In thousands of dollars)

		2013	2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(45.868)	$	(134.073)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion, and amortization		27.881		26.189
Changes in assets and liabilities
Accounts receivable		(1.560)		10.954
Other receivables and prepayments		2.159		(1.613)
Accounts payable and other accrued liabilities		(10.454)		5.655
Accrued payroll, employee benefit plans and related liabilities		(2.480)		(420)
Environmental and other non-current liabilities		8.761		39.290
Interest and other		777		121
Net cash used in operating activities		(20.784)		(53.897)
CASH FLOWS FROM INVESTING ACTIVITIES(1):
Acquisition of property, plant, and equipment		(1.735)		(21.142)
(Increase) decrease in investments and restricted cash		(17.837)		8.014
Net cash used in investing activities		(19.572)		(13.128)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from Parent Company		38.000		58.500
Net cash provided by financing activities		38.000		58.500
NET DECREASE IN CASH AND CASH EQUIVALENTS		(2.356)		(8.525)
CASH AND CASH EQUIVALENTS — Beginning of year		8.952		17.477
CASH AND CASH EQUIVALENTS — End of year	$	6.596	$	8.952

1. Main investing transactions that did not require the use of cash or cash equivalents consisted of increases in asset retirement obligations (see Note 1).

See notes to consolidated financial statements.

YPF HOLDINGS, INC. AND SUBSIDIARIES

(A Wholly Owned Subsidiary of YPF S.A.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2013 AND COMPARATIVE INFORMATION

1. ORGANIZATION

YPF Holdings, Inc. (“Holdings” or the “Company”) was incorporated in Delaware, U.S.A., on July 31, 1996, and holds investments in certain subsidiaries. The Company is engaged in oil and gas exploration activities in the Gulf of Mexico.

YPF S.A. (“YPF” or the “Parent Company”) owns 100% of the Company’s shares.

Law No. 26,741 enacted on May 4, 2012, by the Argentine Congress declared as national public interest and subject to expropriation the Class D Shares of the Parent Company owned by Repsol, its controlled or controlling entities, representing the 51% of the Parent Company’s equity. According to Law 26,741, achieving self-sufficiency in the supply of hydrocarbons in Argentina, as well as in the exploitation, industrialization, transportation and sale of hydrocarbons, is thereby declared a national public interest and a priority for Argentina, with the goal of guaranteeing socially equitable economic development, the creation of jobs, the increase of the competitiveness of various economic sectors and the equitable and sustainable growth of the provinces and regions. Consequently, as from the enactment of the mentioned Law, the Parent Company is controlled by the Argentine Government.

As of December 31, 2013 and December 31, 2012, the Company presents stockholders’ deficit and its financial ability to afford its commitments depends on its Parent Company’s financial support or capital contributions.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Application of International Financial Reporting Standards

The consolidated financial statements of the Company for the year ended December 31, 2013, have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The adoption of IFRS, as issued by the International Accounting Standards Board (“IASB”) was determined by the Technical Resolution No. 26 (ordered text) issued by Argentine Federation of Professional Councils in Economic Sciences (“FACPCE”) and the Regulations of the Argentine Securities Commission (“CNV”).

The consolidated financial statements of the Company as of December 31, 2013, have been prepared for consolidation purposes with YPF’s consolidated financial statements and for its presentation to the CNV in Argentina and may not be appropriate for other purposes. Amounts included in these financial statements are expressed in thousands of dollars (“$”), except where otherwise indicated.

Significant Accounting Policies

Principles of Consolidation — The consolidated financial statements of the Company include the financial statements of the Company and its wholly owned subsidiaries located in U.S.A. (collectively referred to hereafter as “subsidiaries”) Tierra Solutions Inc. (“Tierra”); Maxus Energy Corporation (“Maxus”); Maxus International Energy Company (MIEC); Maxus (U.S.) Exploration Company (“Maxus US”); CLH Holdings, Inc. (CLH); and Gateway Coal Company (“Gateway”). All significant intercompany transactions have been eliminated.

Additionally, YPF Holdings maintains a 15% interest in the Neptune Consortium (see “Oil and Gas Producing Activities” below). BHPB Pet (Deepwater) Inc. is the operator of the consortium. Interest in this joint operation which gives the Company a percentage contractually established over the rights of the assets and obligations that emerge from the contract, have been consolidated line by line on the basis of the mentioned participation over the assets, liabilities, income and expenses related to each contract. Assets, liabilities, income and expenses of joint operations are presented in the consolidated balance sheets and in the consolidated statements of comprehensive income, in accordance with their respective nature.

Use of Estimates — The preparation of financial statements under IFRS requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s consolidated financial statements include amounts that are based on Management’s best estimates and judgments. Actual results could differ from these estimates.

Cash and Cash Equivalents — Short-term, highly liquid investments that have an original maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash are considered cash equivalents.

Available-for-sale securities — As of December 31, 2013, the Company had $3,9 million invested in securities classified as available-for-sale. These securities consist of financial instruments traded on the New York Stock Exchange, and are measured at fair value based on the quoted market prices (unadjusted) of identical assets or liabilities in active markets. A quoted price in an active market is considered to be the most reliable measure of fair value. The effect of changes in value of these assets is recognized as a component of other comprehensive income.

Fair Value of Financial Instruments — Financial instruments are composed of accounts receivable, cash equivalents, investments and accounts payable. The carrying value of such financial instruments approximates their fair value.

Oil and Gas Producing Activities — The Company follows the “successful efforts” method of accounting for its oil and gas exploration and production operations. Accordingly, exploratory costs, excluding the costs of exploratory wells, are charged to expense as incurred. No costs of drilling exploratory wells, including stratigraphic test wells, as of December 31, 2013, have been capitalized, pending determination as to whether the wells have found proved reserves, which justify commercial development.

Capitalized costs, including any capitalized interest, relating to producing properties are depleted by the unit-of-production method. Proved developed reserves are used in computing unit rates for drilling, development and facilities costs. Total proved reserves are used for depletion rates of leasehold costs.

The Company reviews its proved oil and gas properties for impairment when changes in circumstances indicate that the carrying amount of such properties may not be recoverable.

The Company’s Neptune Field Development achieved first production on July 6, 2008.  Production continues with 7 subsea producing wells tied back to a central floating production facility located in Green Canyon 613. The production reached the platform capacity of 50.000 barrels of oil per day (“bopd”) on July 24, 2008.  As of December 31, 2013, the platform was producing an average of over 8.200 bopd.  Approximately $287,9 million has been capitalized by the Company for the Neptune project as of December 31, 2013.  In May 2012, the Neptune consortium approved the $80,7 million AFE for the re-completion of the SB-02 well to produce the M9A and M10/M9X traditional reservoir units. The operation began in August and finished in November 2012. Additionally, the consortium is actively working on the Neptune North East appraisal well (SS-03) that would produce from the north flank oil accumulation, planned to be drilled in the second half of 2014.

The Neptune consortium has agreed to begin the required work of plugging and abandoning Neptune exploratory wells #3 and #4, with an estimated gross cost of $64 million. The work is expected to start in June 2014. Additionally, the consortium is actively working on the Neptune North East appraisal well (SE-01) that would produce from the north flank oil accumulation, planned to be drilled in the second half of 2014.

Asset Retirement Obligations - The Company recognizes accretion expense on the additional capitalized costs as the present value of the future asset retirement obligation increases with the passage of time, and the impact on fixed assets, if any, of changes in estimates of the liability. The following table sets forth a reconciliation of the beginning and ending asset retirement obligation liability:

	12/31/2013		12/31/2012
Asset retirement obligations – beginning of year	10.083		9.554
Asset retirement obligations - increase Accretion expense Obligations paid	23.054 857 (38)		- 529 -
Asset retirement obligations – end of year	33.956		10.083

The asset retirement obligation was increased in the third quarter of 2013 to reflect the additional cost required and the change in the scheduled abandonment date from 2035 to 2017, based on an internal reserve analysis and abandonment cost estimation from the operator of the joint venture.

Other Property, Plant, and Equipment — The Company’s other property, plant, and equipment consisting of software, furniture, fixtures, and installations are being depreciated using the straight-line method, with depreciation rates based on the estimated useful life of each class of property. Normal maintenance and repairs to all other fixed assets have been charged to expense as incurred.

Intangible assets — According to the provisions of IFRS 6, exploration assets corresponding to mineral interests are disclosed in the financial statements as intangible assets. The intangible assets are reviewed periodically and at least annually by Management to ensure the carrying value is recoverable. If necessary, a valuation allowance is provided, by a charge against earnings, to reflect the impairment of unproved acreage.

In September 2012, the Company decided to relinquish 6 blocks from the Alaminos protraction area after further technical evaluations of the blocks. The 6 block relinquishment resulted in a charge of $1,2 million.

On June 1, 2013, the Company released certain 50% interest rights in seventeen blocks located in the Green Canyon area in the Gulf of Mexico to Murphy Oil Company. The resulting financial effect was a reduction in assets of $3,1 million and an additional $1,4 million of accelerated depreciation expense.

Restricted Cash — The restricted cash balance consists of: (1) security deposits for letters of credit, and (2) deposits in trust funds. The letters of credit are used as security with various governmental agencies and as support for bonds posted with governmental agencies or insurance companies.

Amounts deposited in trust funds are used to administer the payments for environmental remediation activities at certain sites as required by various governmental agencies. As of December 31, 2013, the Company had $1,8 million deposited in trust funds and $ 21,4 million as security deposits for letters of credit (see additionally Note 7 - Hudson County, New Jersey).

Income Taxes — Income taxes are recognized for (a) the amount of taxes payable or refundable for the current year and (b) deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. A deferred tax asset is recognized only to the extent that it is probable that taxable profits will be available against which the deductible temporary differences can be utilized. Deferred tax assets and liabilities are measured based upon enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date.

Pension plans - Under IFRS, according to the provisions of IAS 19, actuarial gains and losses are recognized in Other Comprehensive Income, and shall not be reclassified to profit or loss in a subsequent period. However, the entity may transfer those amounts recognized in Other Comprehensive Income within equity (i.e., accumulated deficit).

Pursuant to the IFRS implementation exception provided by IFRS 1, the Company has elected to recognize actuarial gains and losses and remeasurements of available-for-sale securities as a component of Other Comprehensive Income on a prospective basis as of the transition date.

Revenue Recognition — Oil and gas revenues from the Company’s interests in producing wells is recognized as title and physical possession of the oil and gas passes to the purchaser.

1. New Accounting Pronouncements

The standards, interpretations and related amendments published by the IASB and endorsed by the FACPCE and the CNV that have been applied by the Company as from the year beginning on January 1, 2013, are the following:

In May 2011, the IASB issued IFRS 13 “Fair Value Measurement”, which is effective for fiscal years beginning on or after January 1, 2013, with early application permitted. IFRS 13 sets out a single framework for measuring fair value when required by other IFRSs. IFRS 13 applies to financial or non-financial items measured at fair value. The fair value is measured as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”.

In June 2011, the IASB issued an amendment to IAS 19 “Employee Benefits”, which is effective for fiscal years beginning on or after January 1, 2013, with early application permitted. The amendment to IAS 19 eliminates the option to defer recognition of actuarial gains and losses in the measurement of the defined benefit plans, which implies the recognition of all these differences in other comprehensive income.

In June 2011, the IASB issued an amendment to IAS 1 “Presentation of Financial Statements”, which is effective for fiscal years beginning on or after July 1, 2012, with early application permitted. The amendment to IAS 1 improves the presentation of items included in the Statement of Comprehensive Income, classifying by nature and grouping items that may be reclassified to the profit and loss section of the income statement in subsequent periods, when conditions are met, and the items that will not be reclassified. Adoption of the amendment to IAS 1 did not have an impact on the operating income of the Company, implying only new disclosures on the Statement of Comprehensive Income.

The adoption of these standards and interpretations or amendments previously mentioned did not have a significant impact on these financial statements.

The new standards and interpretations or amendments of them, published by the IASB and adopted or in process to be adopted by the Federation of Professional Councils in Economic Sciences and the CNV, that are not in force because their effective date is subsequent to December 31, 2013 and that are not applied in advance to the effective date by the company are the following:

In May 2013, IASB issued the IFRIC interpretation 21, “Levies”, which is effective for fiscal years beginning on or after January 1, 2014, with early application permitted.

IFRIC 21 addresses the accounting for a liability to pay a levy imposed by governments on entities in accordance with legislation.

In May 2013, the IASB issued an amendment to IAS 36, “Impairment of assets”, which is effective for fiscal years beginning on or after January 1, 2014, with early application permitted.

The amendment to IAS 36 changes disclosures requirements regarding to the determination of impairment of assets.

In June 2013, IASB issued a limited modification to IAS 39 with the purpose of allowing the continuation of hedge accounting in cases in circumstances when a hedging instrument is required to be novated.

In November 2013, IASB issued an amendment to IAS 19, to simplify the accounting on employees’ contribution or third party to the defined benefit plans, allowing recognition of the aforementioned contribution as a reduction in the service cost in the period in which the related service was rendered rather than recognizing it at the service period.

On December 2013, IASB issued two documents with amendments to IFRS which are mostly effective for fiscal years beginning on or after July 1, 2014, with early application permitted.

The Company is analyzing the impact of the adoption of the amendments, however, it estimates that the adoption of such amendments will not have an impact on the operating income or the financial position of the Company, and, in some cases, implying only new revelations.

1. ANALYSIS OF THE MAIN ACCOUNTS OF THE FINANCIAL STATEMENTS

Details regarding significant accounts included in the accompanying financial statements are as follows:

Balance Sheets as of December 31, 2013 and December 31, 2012

1. FINANCIAL ASSETS - INVESTMENTS AND RESTRICTED CASH, NON-CURRENT

	12/31/2013		12/31/2012
Investments	984		1.090
Trust Funds – restricted cash	21.392		1.291
	22.376		2.381

1. FINANCIAL ASSETS - INVESTMENTS AND RESTRICTED CASH, CURRENT

	12/31/2013		12/31/2012
Investments	3.860		2.374
Trust Funds – restricted cash	1.813		3.972
	5.673		6.346

Statements of Comprehensive Income for year ended December 31, 2013 and
2012

1. ADMINISTRATIVE AND ENVIRONMENTAL EXPENSES

	Years ended December 31,
	2013		2012
Environmental expense	29.679		37.056
Pension expense	604		1.462
Legal Expense	15.171		99.059
All other administrative expenses	10.436		8.006
	55.890		145.583

1. BALANCES AND TRANSACTIONS WITH RELATED PARTIES

The Company provides transactional support, environmental and technology consulting services, payroll and office space for affiliated companies. During the second quarter of 2012, the Company provided a short-term loan in the amount of $10 million to AESA Perú SAC, which was fully repaid in July 2012. As of December 31, 2013 the Company had $2,6 million of accounts receivable from affiliated parties. The Company had no accounts receivable from affiliated parties at December 31, 2012.

Affiliated companies perform geological and geophysical exploration services for the Company. As of December 31, 2013 the Company had no accounts payable to those affiliated companies and $31 for December 31, 2012.

1. EMPLOYEE BENEFIT PLANS

The Company sponsors a Supplemental Executive Retirement Plan (“SERP”), which is closed to new participants, and an Excess Benefits Plan (“Excess”). As of December 31, 2013, current liabilities of $0,4 million and noncurrent liabilities of $2,7 million are accrued for the Excess/SERP plans.

The Company also provides certain health care and life insurance benefits for eligible retired employees and certain insurance and other postemployment benefits for eligible individuals whose employment was terminated by the Company prior to their normal retirement (collectively the “OPEB”). The Company accrues the estimated cost of the OPEB, during employees’ active service periods. Employees become eligible for these benefits if they met minimum age and service requirements. The Company accounts for the OPEB by accruing the estimated cost of postemployment benefits when the payment of the benefit is probable, and the amount of the benefit can be reasonably estimated. The Company’s policy is to fund the OPEB as claims are incurred. As of December 31, 2013, current liabilities of $2,8 million and noncurrent liabilities of $19,1 million are accrued for OPEB costs.

Retiree medical coverage was offered to a group of non-contributory retirees who had experienced a loss of coverage in 2009 and whose eligibility was confirmed in 2010.  This retiree medical coverage began effective August 1, 2010, is secondary to Medicare, and coverage varies based on the date of retirement and the company from which retirement occurred.

The Company also holds a Supplemental Death Benefit program for certain former executives and a Long Term Disability program for former disabled employees and their dependents.

The programs mentioned above are valued at net present value and are disclosed as current and non-current liabilities in the “Accrued employees benefit plans” account. The interest costs are recognized as “Administrative expenses” in the Consolidated statements of comprehensive income. Actuarial gains and losses are recognized in Other Comprehensive Income and shall not be reclassified to profit or loss in a subsequent period. However, the entity may transfer those amounts recognized in Other Comprehensive Income within equity (i.e., accumulated deficit).

Key information of these plans as of December 31, 2013, and comparative information is as follows:

Defined – benefit obligations	12/31/2013	12/31/2012
Net present value of obligations	29.145		32.331

Changes in the fair value of the defined-benefit obligations	12/31/2013		12/31/2012
Liabilities at the beginning of the year	32.331		37.061
Service cost	-		-
Interest cost	604		1.462
Actuarial (gains)/losses	(907)		(3.334)
Benefits paid and settlements	(2.883)		(2.858)
Liabilities at the end of the year	29.145		32.331
Changes in the fair value of the plan assets	12/31/2013		12/31/2012
Fair value of assets at the beginning of the year	-		-
Expected return on assets	-		-
Actuarial (gains)/losses	-		-
Employer and employees contributions	2.883		2.858
Benefits paid and settlements	(2.883)		(2.858)
Fair value of assets at the end of the year	-		-

	Expenses
Amounts recognized in the Statement of Income	12/31/2013		12/31/2012
Service cost	-		-
Interest cost	(604)		(1.462)
Amendments	-		-
Total pension costs recognized Administrative Expenses	(604)		(1.462)

The Company updates actuarial assumptions at the end of each year.

Actuarial assumptions	2013		2012
Discount rate	3,25 – 3,9%		2,5 – 3,0%
Expected return on assets	N/A		N/A
Expected increase in salaries	N/A		N/A

Estimated Contribution for the Year Ending December 31, 2014	$2.833

The Weighted Average Duration and Sensitivity Analysis for the most significant plans are disclosed below:

The weighted average duration was between 6,5 and 7,5 years for the following Projected Benefit Payments.

Projected Benefit Payments
Estimated Net Benefit Payments for the year ending December 31, 2014	2.833
Estimated Net Benefit Payments for the year ending December 31, 2015	2.734
Estimated Net Benefit Payments for the year ending December 31, 2016	2.581
Estimated Net Benefit Payments for the year ending December 31, 2017	2.408
Estimated Net Benefit Payments for the year ending December 31, 2018	2.293
Estimated Net Benefit Payments for the year ending December 31, 2019-2023	8.781

Sensitivity Analysis – OPEB Measured as of December 31, 2013

	Current Medical Trend Rate	1 % Increase	Percent Change
Defined Benefit Obligation	$21.813	$23.233		6,5%

	Current Medical Trend Rate	1 % Decrease	Percent Change
Defined Benefit Obligation	$21.813	$20.561		(5,7%)

	Current Discount Rate	1 % Increase	Percent Change
Defined Benefit Obligation	$21.813	$20,335		(6,8%)

	Current Discount Rate	1 % Decrease	Percent Change
Defined Benefit Obligation	$21.813	$23.517		7,8%

Sensitivity Analysis – SERP Measured as of December 31, 2013

	Current Discount Rate	1 % Increase	Percent Change
Defined Benefit Obligation	$3.156	$2.972		(5,8%)

	Current Discount Rate	1 % Decrease	Percent Change
Defined Benefit Obligation	$3.156	$3.366		6,7%

1. INCOME TAXES

Deferred income taxes and benefits are provided for differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Significant deferred tax assets and liabilities are related primarily to net operating loss carryforwards, oil and gas properties, and litigation and environmental costs. The Company has not recorded deferred tax assets of $180,1 million and $165 million as of December 31, 2013 and December 31, 2012, respectively, because they do not meet the criteria for recognition under IFRS. The deferred tax assets correspond mainly to (a) temporary deductible differences of $137,6 million and $143,4 million as of December 31, 2013 and December 31, 2012, respectively; and (b) federal net operating loss carryforwards credits of $42,5 million and $21,6 million, as of December 31, 2013 and December 31, 2012, respectively. These amounts are disclosed net of certain tax credits which are subject to certain requirements and restrictions, including limitations on their use as a result of an “ownership change”, may be used to offset future taxable income and thereby reduce our U.S. federal income taxes otherwise payable. Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), imposes an annual limit on the ability of a corporation that undergoes an “ownership change” to use its net operating loss and credit carry forwards to reduce its tax liability.

1. COMMITMENTS and LIABILITIES

Amounts have been provided for various contingencies involving the Company. The estimated probable amounts recorded take into consideration the probability of occurrence, based on management’s expectations and on the opinion of legal counsel. Long term liabilities with fixed or determinable outflows are recorded on a discounted basis.

The major components of commitments and liabilities as of December 31, 2013 and December 31, 2012 are as follows:

		12/31/2013		12/31/2012
Current:
Environmental liabilities		$41.271	$29.538
Legal liabilities		6.180		-
Total Environmental and other short term liabilities		$47.451		$29.538
Noncurrent:
Environmental liabilities		84.736		88.026
Black lung benefits act liabilities		3.558		2.810
Legal liability		67.922		74.076
Miscellaneous liabilities (1)		300		756
Total Environmental and other long term liabilities		156.516		165.668
Total Commitments and liabilities		$203.967		$195.206
	(1) Miscellaneous liabilities are not significant individually

Environmental Liabilities—Environmental liabilities are recorded when environmental assessments and/or remediation are probable and material and such costs to the Company can be reasonably estimated. The Company’s estimate of environmental assessment and/or remediation costs to be incurred is based on either (1) detailed feasibility studies of remediation approach and cost for individual sites or (2) the Company’s estimate of costs to be incurred based on historical experience and publicly available information based on the stage of assessment and/or remediation of each site. Long-term liabilities with fixed or objectively determinable outflows are recorded at their discounted value. As additional information becomes available regarding each site or as environmental remediation standards change, the Company revises its estimate of costs to be incurred in environmental assessment and/or remediation.

Laws and regulations relating to health and environmental quality in the United States affect the operations of the Company as a consequence of the remediation undertaken by Tierra pursuant to commitments made to environmental authorities mainly in connection with Diamond Shamrock Chemicals Company (“Chemicals”), which was sold to Occidental Petroleum Corporation and is presently an Occidental Petroleum Corporation subsidiary. These laws and regulations set various standards regulating certain aspects of health and environmental quality; provide for penalties and other liabilities for the violation of such standards; and establish, in certain circumstances, remedial obligations.

The Company believes that its policies and procedures in the areas of pollution control, product safety, and occupational health are adequate to prevent reasonable risk of environmental and other damage, and of resulting financial liability, in connection with its business. Some risk of environmental and other damage is, however, inherent in particular operations of the Company, and as discussed below, Maxus and Tierra could have certain potential liabilities associated with operations of Maxus’s former chemical subsidiary. The Company cannot predict which environmental legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered or enforced. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies, could, in the future, require material expenditures by the Company for the installation and operation of systems and equipment for remedial measures, possible dredging requirements, and in certain other respects. Also, certain laws allow for recovery of natural resource damages from responsible parties and ordering the implementation of interim remedies to abate an imminent and substantial endangerment to the environment. Potential expenditures for any such actions cannot be reasonably estimated.

In connection with the sale of Maxus’s former chemical subsidiary, Chemicals, to Occidental Petroleum Corporation (together with its subsidiary Occidental Chemical Corporation, “Occidental”), Maxus agreed in 1986 to indemnify Chemicals and Occidental from and against certain liabilities relating to the business or activities of Chemicals prior to the September 4, 1986, closing date (the “Closing Date”), including certain environmental liabilities relating to certain chemical plants and waste disposal sites used by Chemicals prior to the Closing Date.

As of December 31, 2013, the environmental liabilities discussed herein totaled approximately $126 million. Management believes it has adequately accounted for all environmental liabilities that are probable and can be reasonably estimated as of such time; however, changes in circumstances could result in changes, including additions, to such liabilities in the future.

Environmental Liabilities (in millions of dollars)
Project	12/31/2013			12/31/2012
Newark	$14,7			$17,1
Passaic River	58,8			55,8
Hudson County (Kearny)	17,3			17,0
Painesville RIFS	17,8			14,9
Greens Bayou	3,6			3,9
Tuscaloosa	5,8			5,8
Other Sites	8,0			3,1
	$126,0			$117,6

In the following discussion concerning plant sites and third-party sites, references to the Company include, as appropriate and solely for ease of reference, references to Maxus and Tierra. Maxus and Tierra are both wholly owned subsidiaries of the Company.

Newark, New Jersey - A consent decree, previously agreed upon by the U.S. Environmental Protection Agency (EPA), the New Jersey Department of Environmental Protection and Energy (DEP), and Occidental, as successor to Chemicals, was entered in 1990 by the U.S. District Court of New Jersey for Chemicals’ former Newark, New Jersey agricultural chemicals plant. The interim remedy has been completed and paid for by Tierra pursuant to the above-described indemnification obligation to Occidental. This project is in the operation and maintenance phase. Operating and maintaining such remedy is expected to cost approximately $1,0 million per year, and as of December 31, 2013, the Company has accounted for approximately $14,7 million in connection with such activities.

Passaic River/Newark Bay, New Jersey - Maxus, on behalf of Occidental, negotiated an agreement with the EPA (the “1994 AOC”) under which Tierra has conducted testing and studies to characterize contaminated sediment and biota in a six-mile portion of the Passaic River near the plant site. The stability of the sediments in the entire six-mile portion of the Passaic River study area was also examined as a part of Tierra’s studies. The work under the 1994 AOC was substantially subsumed by the remedial investigation and feasibility study (“RI/FS”) being performed and funded by Tierra and 70 other parties which have a nexus to the lower 17-mile portion of the Passaic River (including the six-mile portion already studied) pursuant to a 2007 administrative settlement agreement (the “2007 AOC”). The parties to the 2007 AOC have maintained ongoing discussions about the possibility of further work with the EPA. The entities that have agreed to fund the RI/FS have negotiated an interim allocation of RI/FS costs among themselves based on a number of considerations and formed a group called the Cooperative Parties Group (the “CPG”). The 2007 AOC is being coordinated with a joint federal, state, local and private sector cooperative effort designated as the Lower Passaic River Restoration Project (“PRRP”). OCC, Maxus and Tierra withdrew from the CPG in May 2012 under protest and reserving all their rights. See paragraph title “Passaic River 10.9 Removal Action” below for further details.

The EPA’s findings of fact in the 2007 AOC (which amended the 1994 AOC) indicate that combined sewer overflow/storm water outfall discharges are an ongoing source of hazardous substances to the Lower Passaic River Study Area. For this reason, during the first semester of 2011, Maxus and Tierra negotiated with the EPA, on behalf of Occidental, a draft Administrative Settlement Agreement and Order on Consent for Combined Sewer Overflow/Storm Water Outfall Investigation (“CSO AOC”), which was signed and became effective in September 2011. Besides providing for a study of combined sewer overflows in the Passaic River, the CSO AOC confirms that there will be no further obligations to be performed under the 1994 AOC. Tierra estimates that the total cost to implement the CSO AOC is approximately $5,0 million and will take approximately two years to complete.

In 2003, the DEP issued a directive (“Directive No. 1”) to Occidental and Maxus and certain of their respective related entities as well as other third parties. Directive No. 1 seeks to address natural
resource damages allegedly resulting from almost 200 years of historical industrial and commercial
development of the lower 17 miles of the Passaic River and a part of its watershed. Directive No. 1 asserts that the named entities are jointly and severally liable for the alleged natural resource damages without regard to fault. The DEP has asserted jurisdiction in this matter even though all or part of the lower Passaic River has been designated as a Superfund site and is a subject of the PRRP. Directive No. 1 calls for the following actions: interim compensatory restoration, injury identification, injury quantification, and value determination. Maxus and Tierra responded to Directive No. 1 setting forth good-faith defenses. Settlement discussions between the DEP and the named entities have been held; however, no agreement has been reached or is assured.

In 2004, the EPA and Occidental entered into an administrative order on consent (“2004 AOC”) pursuant to which Tierra (on behalf of Occidental) has agreed to conduct testing and studies to characterize contaminated sediment and biota and evaluate remedial alternatives in Newark Bay and portions of the Hackensack River, the Arthur Kill and the Kill van Kull. The initial fieldwork on this study, which includes testing in Newark Bay, has been substantially completed. Discussions with the EPA regarding additional work that might be required are under way. EPA has issued General Notice Letters to a series of additional parties concerning the contamination of Newark Bay and the work being performed by Tierra under the 2004 AOC. In addition, in August 2010, Tierra proposed to the other parties that for the third stage of the RI/FS undertaken in Newark Bay, the costs be allocated on a per capita basis. As of December 31, 2013, the parties have not agreed to Tierra´s proposal to share costs on a per capita basis. However, the Company lacks sufficient information to determine additional costs, if any, it might have with respect to this matter once the final scope of the phase III is approved, as well as the proposed distribution previously mentioned.

In December 2005, the DEP issued a directive to Tierra, Maxus and Occidental directing said parties to pay the state of New Jersey’s costs of developing a Source Control Dredge Plan focused on allegedly dioxin-contaminated sediment in the lower six-mile portion of the Passaic River. The development of this plan was estimated by the DEP to cost approximately $2,3 million. The DEP has advised the recipients that (1) it is engaged in discussions with the EPA regarding the subject matter of the directive, and (2) the recipients are not required to respond to the directive until otherwise notified. In June 2007, the EPA released a draft Focused Feasibility Study (“FFS”). The draft FFS outlined several alternatives for remedial action in the lower eight miles of the Passaic River. These ranged from no action (which would result in comparatively little cost) to extensive dredging and capping in the lower eight miles of the river (which, according to the draft FFS, the EPA estimated could cost from $0,9 billion to $2,3 billion). Tierra, in conjunction with the other parties working under the 2007 AOC, submitted extensive comments on the draft FFS to the EPA, as did a number of other interested parties. As a result of the comments received, EPA withdrew the FFS for revision and further consideration of the comments. In January 2013, EPA indicated that the FFS would be made public in June or July 2013, assuming there were no significant issues identified by the National Remedy Review Board “NRRB”), or in September 2013, if the NRRB raised significant issues that need to be addressed. During the first quarter of 2013, Tierra received information indicating that the EPA still had unresolved issues regarding modeling and, consequently, the FFS would not be made public in December 2013. At that time, EPA unofficially informed Tierra that the FFS would be issued by the end of January 2014 or the beginning of February 2014. In November 2013, at a Community Advisory Group (“CAG”) meeting, the EPA described the alternatives it is considering in the revised FFS. The EPA stated that the FFS will set forth four alternatives: (i) no action, (ii) deep dredging with backfill of 9.7 million cubic yards over 12 years (EPA estimated cost: U.S. $1.4 billion to U.S. $3.5 billion, depending on whether the dredged sediment is disposed of in a confined aquatic disposal facility on the floor of Newark Bay (“CAD”) or at an off-site disposal facility or local decontamination and beneficial use ); (iii) capping with dredging of 4.3 million cubic yards over 6 years (EPA estimated cost: $1.0 billion to $1.8 billion, depending on whether there is a CAD or off-site disposal or local decontamination and beneficial use), (iv) focused dredging and capping of 0.9 million cubic yards over 3 years (EPA estimated cost: U.S. $0.4 billion to U.S.$0.6 billion, depending on whether there is a CAD or off-site disposal or local decontamination and beneficial use). As of the date of these financial statements, the FFS is expected to be released to the public in March or April 2014. If the EPA keeps to the announced schedule, it is anticipated that the Record of Decision would be issued twelve to eighteen months after the FFS is made public.

The 17 miles of the Lower Passaic River from its confluence with Newark Bay to Dundee Dam pursuant to the 2007 AOC is the subject of a Remedial Investigation / Feasibility Study that is anticipated to be completed in 2015, following which EPA will select a remedy and notice it for public comment.

Based on the information available to the Company as of the issuance date of these financial statements, considering the potential final proposal, the results of the studies and discoveries to be produced, the several potential responsible parties involved in the matter, with its consequent potential allocation of removal costs, and also considering the opinion of external and internal counsels, it is not possible to reasonably estimate a loss or range of losses on these outstanding matters. Therefore, no amount has been accrued for this litigation by the Company.

In August 2007, the National Oceanic and Atmospheric Administration (“NOAA”), as one of the Federal Natural Resources (“Trustees”), sent a letter to a number of entities it alleged have a liability for natural resources damages, including Tierra and Occidental, requesting that the group enter into an agreement to conduct a cooperative assessment of natural resources damages in the Passaic River and Newark Bay. In November 2008, Occidental and Tierra entered into an agreement with the Trustees to fund a portion of the Trustees’ past costs and conduct certain assessment activities during 2009. A group of approximately 20 other parties has also entered into a similar agreement with the Trustees. In November 2009, Tierra declined to extend this agreement.

In June 2008, the EPA, Occidental and Tierra entered into an AOC (“Removal AOC”) pursuant to which Tierra (on behalf of Occidental) would undertake a removal action of sediment from the Passaic River in the vicinity of the former Diamond Alkali facility. This action would result in the removal of approximately 200.000 cubic yards (153.000 cubic meters) of sediment, to be carried out in two different phases. The first phase, which commenced in July 2011, encompassed the removal of 40.000 cubic yards (30.600 cubic meters) of sediments and was completed at the end of 2012. The EPA inspection was held in January 2013. Tierra received written confirmation of completion in March 2013. The second phase involves the removal of approximately 160.000 cubic yards (122.400 cubic meters) of sediment. This second phase will start when an appropriate disposal facility is agreed upon. Pursuant to the Removal AOC, the EPA has required the provision of financial assurance in the amount of $80 million for the performance of the removal work. The Removal AOC provides that the initial form of financial assurance is to be provided through a trust fund. The total amount of required financial assurance may be increased or decreased over time if the anticipated cost of completing the removal work contemplated by the Removal AOC changes. Tierra may request modification of the form and timing of financial assurance for the Removal AOC. During the first half of 2011, the Company signed a Removal Design Services and Construction Contract with the contractor responsible for the removal action, in which the costs originally estimated for the first phase of the Removal AOC were re-estimated. Construction of both the sheet pile enclosure in the river and the sediment dewatering and water treatment operation at the upland processing facility were completed in the first quarter of 2012; dredging and de-watering activities were completed in the second quarter of 2012. Backfilling of non-contaminated sediment was completed in the third quarter of 2012. Removal of all equipment occurred in the fourth quarter of 2012. The removal work will remove a number of contaminants of concern, which may have come from sources other than or in addition to the former Diamond Alkali plant. The Company may seek cost recovery from the parties responsible for such contamination. However, as of December 31, 2013, it is not possible to make any predictions regarding the likelihood of success or the funds potentially recoverable in a cost-recovery action.

In relation to the supposed contamination related to dioxin and other “hazardous substances” discharged from Chemicals’ former Newark plant and the contamination of the lower stretch of the Passaic River, Newark Bay, other nearby waterways and surrounding areas, in December 2005, the DEP sued YPF Holdings Inc., Tierra, Maxus and several other companies, in addition to Occidental, in the Superior Court for Essex County, New Jersey, alleging contamination supposedly related to dioxin and other “hazardous substances” discharged from Chemicals’ former Newark plant and the contamination of the lower portion of the Passaic River, Newark Bay, other nearby waterways and surrounding areas. The DEP seeks past costs of investigation and cleanup of these waterways, economic damages, cost of a natural resources damage assessment, punitive damages and other claims.

A First Amended Complaint was filed in November 2007, in which the plaintiffs withdrew certain claims for natural resource damages (but continued to seek to recover the costs of assessing any damages to natural resources). In March 2008, the Court denied motions to dismiss by Occidental Chemical Corporation, Tierra and Maxus.

The DEP filed its Second Amended Complaint in April 2008. YPF S.A. filed a motion to dismiss for lack of personal jurisdiction. The motion mentioned previously was denied in August 2008, and the denial was confirmed by the Court of Appeal. In September 2008, the Court denied plaintiffs’ motion to block Maxus and Tierra from filing claims against third parties who had discharged hazardous substances into the Passaic River or Newark Bay and, as a result, were alternative causes of the plaintiffs’ alleged costs and damages. Accordingly, in February 2009, Maxus and Tierra filed third party claims against approximately 300 private companies, sewage commissions and governmental entities (including certain municipalities) which could have responsibility for both any judgment that might be imposed on Maxus and Tierra and equitable share of all cleanup and removal costs that Maxus and Tierra have incurred. Anticipating this considerable expansion of the number of parties in the litigation, the court appointed a Special Master to assist the court in the administration of discovery.

DEP filed its Third Amended Complaint in August 2010, adding Maxus International Energy Company and YPF International S.A. as additional named defendants. In September 2010, Governmental entities of the State of New Jersey and a number of third-party defendants filed their dismissal motions and Maxus and Tierra filed their responses.

In October 2010, a number of public third-party defendants filed a motion to sever and stay Maxus and Tierra’s third party claims, so as to allow the plaintiffs to proceed solely against the originally named defendants and deferring indefinitely any prosecution of Maxus and Tierra’s claims against the third party defendants. The plaintiffs promptly joined the third party defendants’ severance motion. In November 2010, however, the court denied the severance motion in its entirety.

In May 2011, the court issued Case Management Order XVII (“CMO XVII”), which set forth the trial plans and provided for case management over the next phases of the litigation. The Trial Plan established two trial Phases (Liability and Damages) and nine Tracks. Moreover, the Liability Phase addressed first liability on the plaintiffs’ claims (Tracks I through III) and then liability on Maxus and Tierra’s third party claims (Tracks IV through VII). Similarly, the Damages Phase first addressed the State’s alleged damage (Track VIII), and then addressed Maxus and Tierra’s claims to allocate those damages among the third party defendants and to recoup from the Third Party Defendants an equitable share of Maxus and Tierra’s own cleanup and removal costs (Track IX). A final track (to take place at an undetermined date) addressed the possibility of de minimis and de micromis settlements (Track X).

Following the entry of CMO XVII, the State and Occidental filed motions for partial summary judgment. The State filed two motions, one against Occidental and Maxus, seeking a partial summary judgment that Occidental is liable to the State under the Spill Act, and the other against Tierra, arguing that Tierra, too, has Spill Act liability to the State. Occidental, meanwhile, brought a motion for partial summary judgment of liability against Maxus on Occidental’s indemnity claims. (Occidental also joined the State’s motion against Tierra). In July and August 2011, the court ruled that (i) Occidental is the legal successor of any liabilities incurred by the corporation previously known as Diamond Alkali Corporation, Diamond Shamrock Corporation and Diamond Shamrock Chemicals Company, (ii) Occidental is a “discharger” of hazardous substances and is therefore “liable” to the State under the New Jersey Spill Act for any cleanup and removal costs associated with discharges from the Lister Avenue Site; however, this ruling did not establish “causation” or “nexus” between any discharges and any of the alleged cleanup and removal costs or damages, (iii) the factual findings made in the Aetna litigation are not binding on Occidental and Maxus in the Passaic River litigation under the doctrine of collateral estoppels, (iv) Tierra has Spill Act liability to the State based merely on its current ownership of the Lister Avenue Site, and (v) Maxus has an obligation under the 1986 Stock Purchase Agreement to indemnify Occidental for any Spill Act liability arising from contaminants discharged from the Lister Avenue Site.

During the fourth quarter of 2011, the parties agreed on a consensus trial plan for Track III under CMO XVII, which narrowed the scope of issues for discovery and trial in May 2012 to factual issues relevant to determining Maxus’s alleged direct liability to the State of New Jersey and to issues relating to responsibility for discharges during the era when the Newark plant site was under the ownership of Kolker Chemical Works. The Court accepted six applications for Fast Track Arbitration—discovery proceeded in January 2012, to be followed by depositions and arbitration briefing. In addition, Maxus submitted to the Special Master and the “Additional Dischargers” Committee a plan to sample the area around mile 10.9 of the Passaic River for the HCX chemical marker that Maxus believes is associated with dioxin discharged by one or more third-party defendants. The HCX sampling was completed in January 2012 and validated results were received in March 2012. The HCX sampling event now indicates a second significant dioxin source in the northern part of the Passaic River around mile 10.9, unrelated to the Lister Avenue site. Moreover, Maxus negotiated a satisfactory resolution of a dispute regarding a number of documents that Maxus had declined to produce to the plaintiffs based on assertions of privilege. Finally the Special Master called for and held a settlement conference in late November 2011 between the State of New Jersey, on the one hand, and Repsol, YPF and Maxus, on the other hand to discuss the parties’ respective positions, but no agreement was reached.

In February 2012, plaintiffs and Occidental filed motions for partial summary judgment, seeking summary adjudication that Maxus has liability under the Spill Act based on the following arguments: (1) Even if Occidental is the direct corporate successor of DSCC, Maxus should also be deemed a successor pursuant to the de facto merger and “mere continuation” doctrines based on the 1983-84 corporate reorganization of DSC-1 and subsequent alleged actions by Maxus to undertake environmental response activities in connection with the Lister Avenue site, (2) Maxus has been the “alter ego” of Tierra since Tierra’s creation in 1986, and thus shares Tierra’s Spill Act liability based on Tierra’s ownership of the Lister Avenue site, (3) Maxus qualifies under the Spill Act as a person “in any way responsible” for hazardous substances discharged from the Lister Avenue site, given the liberal interpretation of the Spill Act adopted by the New Jersey Supreme Court, and (4) the State of New Jersey is a “third party beneficiary” of the indemnity provisions of the 1986 SPA (Only the State is asserting this last theory; OCC does not agree that the State is a third party beneficiary of the 1986 SPA). In March 2012, Maxus submitted its briefs in opposition and OCC and plaintiffs submitted reply briefs in April. Oral arguments were heard during May 15-16, 2012. The judge held that Maxus has direct liability for the contamination generated by the Lister Avenue site. He ruled in favor of Maxus on item (1) above and against Maxus on items (2) through (4). However, the judge did not rule on the volume, toxicity or cost causation of the contamination generated by the Lister Avenue site. These issues would be determined in a later phase of the trial.

The Court issued the Track VIII order on September 11, 2012. The Track VIII Order governs the process by which the Court will conduct the discovery and trial of the State’s damages against Occidental, Maxus and Tierra (caused by the Diamond Alkali Lister Avenue plant). Under the Order, the trial for the first phase of Track VIII was scheduled to commence in July 2013. However, this schedule was changed by the following occurrence.

On September 21, 2012, Judge Lombardi granted the State’s application for an Order to Show Cause to Stay all proceedings against third party defendants who entered into a Memorandum of Understanding (“MOU”) with the State to discuss settlement of the claims against the third party defendants. Accordingly, the Court entered a 90-day stay for the State to complete negotiations with the third party defendants who signed the MOU, subject to later approval of those settlements from the Court. This stay was extended indefinitely pending further action by the court. The State and the third party defendants reported to the Court that they were continuing to make progress toward a settlement.

On September 27, 2012, Occidental filed its Amended Cross-Claims and the following day, the State filed its fourth Amended Complaint. The principal changes to the State’s pleading concerned the State’s allegations against YPF and Repsol, all of which Occidental adopted in its cross-claims. In particular, there were extensive new allegations against Repsol involving asset stripping from Maxus and also from YPF based on the Argentine government’s Mosconi Report. In response to the State’s fourth Amended Complaint, Repsol, YPF and Maxus sought leave from the Special Master to file motions to dismiss based on statute of limitations and other grounds. Oral arguments on these motions were scheduled to be heard the last week of February 2013; however, the oral arguments were postponed indefinitely pending further action by the Court.

On October 25, 2012, the parties to the litigation agreed to a Consent Order, subject to approval by Judge Lombardi, which, in part, extended the deadline for YPF to respond to the State's and Occidental's new pleadings by December 31, 2012, extended fact deposition discovery until April 26, 2013, extended expert discovery until September 30, 2013, and set trial on the merits for certain allegations (Tracks II and IV) for February 24, 2014. On October 26, 2012, the Court again amended the trial plan for Tracks II and IV, adjusting discovery and summary judgment deadlines and setting trial for February 24, 2014. On February 14, 2013, the plaintiffs and all defendants except Occidental appeared before the Court to seek a stay of the litigation because they had agreed to recommend terms for a settlement framework to resolve the claims between them.

As of December 31, 2013, DEP had not filed with the Court dollar amounts on all its claims, but it had (a) contended that a $50 million cap on damages under one of the New Jersey statutes should not be applicable, (b) alleged that it has incurred approximately $118 million in past “cleanup and removal costs” (plus legal costs to 2009), (c) sought an additional award between $10 and $20 million to fund a study to assess natural resource damages, (d) notified Maxus and Tierra’s legal defense team that DEP is preparing financial models of costs and of other economic impacts and, (e) sought reimbursement for external legal fees paid.

During the fourth quarter of 2012 and the first quarter of 2013, YPF, YPF Holdings, Maxus and Tierra, together with certain other defendants in the litigation began a process of mediation and negotiation with the objective of seeking a settlement with the State of New Jersey.  During this time, the Court suspended all activity in the case.  Between May 31, 2013 and June 6, 2013, the following parties signed a Settlement Agreement with the State to partially settle the Spill Act litigation: Repsol S.A., YPF Holdings, Inc. CLH Holdings, Maxus, Tierra, Maxus International Energy Company, YPF, S.A. and YPF International S.A. The Settlement Agreement was posted on the DEP website on June 7, 2013. An Executive Summary of the Settlement Agreement was provided to the Court and posted on Case Vantage on June 24, 2013. Notice of the Settlement Agreement appeared in the July 1, 2013 New Jersey Register, and the Settlement Agreement was published on the DEP website on that same day together with the administrative record for the Settlement Agreement. Pursuant to the terms of the Settlement Agreement, the State of New Jersey would agree to release certain claims related to environmental damage to the Passaic River in New Jersey and to limit the liability of YPF, YPF Holdings, Maxus and Tierra and certain other defendants, in the event that the Court finds them liable, for up to US $400 million.  As part of the Settlement Agreement, either YPF or Maxus would make a payment of US $65 million to the State of New Jersey within 60 days of Court approval of the Settlement Agreement.

On September 18, 2013, the Court published its Case Management Order XVIII (“CMO 18”), which provided a schedule for public comments to the proposed Settlement Agreement and for filing briefs with the Court both in opposition and in support of the settlement.

On December 12, 2013 the Judge approved the Settlement Agreement together with the settlement agreement executed between the State of New Jersey and the third parties defendants. On January 24, 2014 Occidental filed a notice of appeal from the court's approval of the Settlement Agreement, stating that it was not objecting to the partial settlement of Track VIII (quantum of damages caused by Chemicals’ Newark plant) but to the delay in the commencement of Track IV (Occidental’s claims under the doctrines of alter ego and fraudulent conveyance against Repsol and YPF). On February 3, 2014, the court of appeals informed the parties that it questioned whether or not Judge Lombardi’s decision on December 12th regarding the timing of Track IV was final or interlocutory. The State of New Jersey argued to the court that Judge Lombardi’s decision was a final order, while Occidental argued that the decision was an interlocutory order. The court is expected to decide the question in March or April 2014. On February 10, 2014, Maxus deposited into an escrow account $65 million in fulfillment of its and YPF S.A.’s obligations under the terms of the Settlement Agreement.

In the third and fourth quarter of 2013, Maxus has been successful in negotiating and executing settlement agreements with a number of Third Party Defendants who have not settled with the State of New Jersey. Maxus has received approximately $1 million from 24 Third Party Defendants pursuant to such settlement agreements.

As of December 31, 2013, there is a total of approximately $123,8 million of environmental and legal liability comprising the estimated costs for studies, the Company’s best estimate of the cash flows it could incur in connection with remediation activities considering the studies performed by Tierra, the estimated costs related to the Removal AOC agreement, and in addition certain other matters related to Passaic River and the Newark Bay, also including certain related legal matters. However, it is possible that other works, including interim remedial measures different from those considered may be ordered. In addition, the development of new information, the imposition of penalties, or remedial actions or the result of negotiations related to the matters referred to above, differing from the scenarios that the Company has evaluated, could result in additional costs to the amount currently accrued.

Passaic River Mile 10.9 Removal Action – In February 2012, the EPA issued to the CPG a draft Administrative Settlement Agreement and order on Consent (“AOC RM 10.9”) for Removal Action to address high levels of contamination of TCDD dioxin, PCBs, mercury and other contaminants of concern in the vicinity of the Passaic River’s mile 10.9, comprised of a sediment formation (“mud flat”) of approximately 8.9 acres. In connection with this AOC RM 10.9, the EPA informed the CPG that approximately 16,000 cubic yards of sediments should be removed and that pilot scale studies be conducted to evaluate ex situ decontamination beneficial reuse technologies, innovative capping technologies, and in situ stabilization technologies for consideration and potential selection as components of the remedial action to be evaluated in the 2007 AOC and the FFS and selected in one or more subsequent records of decision. On June 18, 2012, the EPA announced that it had signed the AOC RM 10.9 with 70 parties. OCC, Maxus and Tierra declined to sign such AOC since they could not come to an agreement with the other parties in the CPG on how to allocate the estimated cost of the removal action. On June 25, 2012, the EPA issued to OCC an order, under section 106 of CERCLA, to participate and cooperate with the members of the CPG that have signed the AOC RM 10.9 (the “106 Order’). On June 26, 2012, the EPA proposed to Maxus and Tierra that OCC could meet its obligation to submit a good faith offer by maintaining and making available to the CPG for one year the dewatering facility currently in place for phase one of the river mile 3.2 removal action pursuant to the Removal AOC. After assessing the costs and benefits of complying or not complying with the 106 Order, Maxus and Tierra, with OCC concurrence, decided to respond to the 106 Order in the affirmative. Consequently, on July 23, Maxus/Tierra notified EPA and the CPG of OCC’s intent to comply with the order by maintaining and making available to the CPG the dewatering facility then in place for the Maxus/Tierra removal action at river mile 3.2, and on July 27, Maxus/Tierra transmitted to CPG, with a copy to the EPA, OCC’s good faith offer consisting of the extension of the ground lease and the maintenance of the dewatering equipment. On August 10, the CPG rejected OCC’s good faith offer, and, in response to the EPA’s request for the basis for such rejection, on September 7 the CPG stated they had alternative plans for handling sediment to be excavated at RM 10.9 and, therefore, did not have any use for the existing dewatering facility. EPA, by letter of September 26, 2012, advised that it would be necessary for EPA and Occidental to discuss other options for Occidental to participate and cooperate in the RM 10.9 removal action, as required by its Unilateral Administrative Order. On September 18, 2012, the EPA advised the Passaic River Community Advisory Group (CAG) that the bench scale studies of the treatment technologies did not sufficiently lower concentrations of the chemicals to justify the cost, so the RM 10.9 sediments will be removed offsite for disposal. EPA notified OCC, Maxus and Tierra that it will discuss other options for how they may comply with the 106 Order and has extended the deadline for submitting financial assurance to March 14, 2014.

Based on the information available to the Company as of the issuance date of these financial statements, considering the results of the studies and discovery process as well as the potential responsibility of the other parties involved in this matter and the potential allocation of removal costs, based on the advice of our external and internal legal counsel, it is not possible to reasonably estimate a loss or range of losses related to these outstanding matters. Therefore, no amount has been accrued in respect of these claims.

Hudson County, New Jersey - Until 1972, Chemicals operated a chromite ore processing plant in Kearny, New Jersey (the “Kearny Plant”). According to the DEP, wastes from these ore processing operations were used as fill material at a number of sites in and near Hudson County. DEP has identified over 200 sites in Hudson and Essex Counties alleged to contain chromite ore processing residue either from the Kearny Plant or from plants operated by two other chromium manufacturers. Tierra, Occidental (as successor to Chemicals) and DEP signed an Administrative Consent Order in April 1990 (“Kearny ACO”) which requires investigation and remediation work at 40 chromite ore sites in Hudson and Essex Counties alleged to be impacted by the Kearny Plant operations. Subsequently, in May 2005, the DEP took two actions in connection with the chrome sites in Hudson and Essex counties. First, the DEP issued a directive to Maxus, Occidental and two other chromium manufactures (the “Respondents”), directing them to pay the DEP a total of $19,5 million to conduct a study and arrange for the cleanup of chromite ore residue at the three sites in Jersey City. While the Company believed that Maxus was improperly named and there was little or no evidence that Chemical’s chromite ore residue was sent to any of these sites, the DEP claimed the Respondents were jointly and severally liable without regard to fault. Second, the DEP filed a lawsuit against Occidental and two other entities in state court in Hudson County, seeking among other things, (a) cleanup of various sites where chromite ore processing residue is allegedly located, (b) recovery of past costs incurred by the state at such sites (including in excess of $2,3 million allegedly spent for investigation and studies), and, (c) with respect to certain costs at other 18 sites, treble damages. In February 2008, the parties reached an agreement in principle, pursuant to which Tierra would pay, on behalf of Occidental, $5,0 million and would perform remediation work at the three sites, with total costs of approximately $2,1 million, subject to the terms of a Consent Judgment between and among DEP, Occidental and two other parties, which was published in the New Jersey Register in June 2011, and became final and effective as of September 2011. Pursuant to the Consent Judgment, the $5,0 million payment was made in October 2011 and a master schedule was delivered to DEP in February 2012 for the remediation, during a ten-year period, of the three orphan sites plus the remaining chrome ore sites (approximately 28 sites) under the Kearny ACO. DEP indicated that it could not approve a ten-year term; therefore, in March 2012, Maxus submitted a revised eight-year master schedule, which was approved by DEP on March 24, 2013. Maxus, on behalf of Occidental, is providing financial assurance in the amount of $20 million for performance of the work. The master schedule contemplates that the remediation will proceed at sites in discrete groupings. There are 26 sites that have not yet received a No Further Action (“NFA”) determination. During the first and second quarters of 2013, Tierra began work pursuant to the master schedule and has completed the following tasks: submitted site 86 closure document; continued operation and maintenance activities at all sites; commenced scoping out supplemental remedial investigation work at six sites (54, 60, 61, 149 and 176); developed documents in support of site 47 remediation; developed documents in support of site 59 remediation; and coordinated subregion I (sites 50, 51, 103 and 131) activities with the planned portal bridge construction, adjacent to those sites. During the year 2013, Tierra began work pursuant to the Master Schedule, the most salient activities being commencement of scope of work for remedial investigation at six sites and coordination of subregion I activities with the planned Portal Bridge construction adjacent to those sites, all of which work continued in the first quarter of 2014.

While Tierra has participated in the cost of studies and is implementing interim remedial actions and conducting remedial investigations, the ultimate cost of remediation is uncertain.

In addition:

• In November 2005, several environmental groups sent a notice of intent to sue the owner of the property adjacent (the “Adjacent Property” or Standard Chlorine Chemical Site) to the former Kearny Plant and five other parties, including Tierra, under the Resource Conservation and Recovery Act. The stated purpose of the lawsuit, if filed, would be to require the noticed parties to carry out measures to abate alleged endangerments to health and the environment emanating from the Adjacent Property. The parties have entered into an agreement that addresses the concerns of the environmental groups, and these groups have agreed not to file suit. After the original agreement expired, the parties entered into a new Standstill Agreement, effective March 7, 2013.
• In March 2008, the DEP approved an Interim Response Action plan for work to be performed at the Kearny Plant site by Tierra and at the Standard Chlorine Chemical Site by Tierra in conjunction with two other parties (these parties and Tierra collectively formed the “Peninsula Restoration Group” or “PRG”). The Interim Response Action covering both the Kearny Plant site and the Standard Chlorine Chemical Site was approved by the DEP in June 2010. Separately, this Adjacent Property was listed by EPA on the National Priority List in 2007. In July 2010, EPA notified Tierra (on behalf of OCC) along with three other parties that they are potentially responsible for the Standard Chlorine Chemical Site. The EPA requested a good faith offer to conduct a Remedial Investigation/ Feasibility Study (“RI/FS”) for this site. Tierra (on behalf of OCC), one of the other PRG members and a newly identified potentially responsible party - Cooper Industries (or “Cooper”) submitted a good faith estimate offer to negotiate and Administrative Order on Consent (“AOC”) to perform the RI/FS. The third member of the PRG made an inability-to-pay submission to EPA and is no longer active in the PRG. In the fourth quarter 2011, the PRG reached an agreement in principle with Cooper, whereby Cooper would join the PRG. In addition, in February 2013 EPA issued a notice of liability to yet another potentially responsible party with whom the PRG entered into discussions in an effort to convince the party to join the group. Effective May 3, 2013, Occidental (represented by Tierra) and three other potentially responsible parties signed with the EPA an AOC to conduct an RI/FFS. The Remedial Investigation Work Plan for the site was submitted to the EPA on April 8, 2013 in advance of the execution of the AOC as part of the PRG’s show of good faith. EPA approval of the Work Plan was received in September 2013 and work under the RI/FFS is ongoing.
• Financial assurance in the form of a trust fund in the amount of $750,000 has been posted on behalf of the AOC respondents and will be utilized to fund the cost of the work going forward. At present, such amount is expected to fund the entire RI/FFS obligation.
• Pursuant to a request of the DEP, in the second half of 2006, the PRG tested the sediments in a portion of the Hackensack River near the former Kearny Plant. A report of those test results was submitted to the DEP. DEP requested additional sampling, and the PRG submitted to DEP work plans for additional sampling in January 2009. In March 2012, the PRG received a Notice of Deficiency (“NOD”) letter from DEP relating to the Hackensack River Study Area (“HRSA”) Supplemental Remedial Investigation Work Plan (“SRIWP”) that the PRG had submitted to the DEP in January 2009. In the NOD, DEP seeks to expand the scope of work that would be required in the Hackensack River under the SRIWP to add both additional sample locations/core segments and parameters. While the PRG acknowledges that it is required to investigate and prevent chrome releases from certain upland sites into the river, the PRG contends that it is has no obligation under the governing ACOs and Consent Judgment to investigate chrome contamination in the river generally. The PRG responded to the NOD with those and other arguments requesting the NOD be withdrawn. Negotiations between the PRG and the DEP are ongoing.
• In August 2011, Tierra entered into a Letter of Intent with BEM Solar to study the feasibility of constructing a solar generation project on the Kearny plant site. The project has not been able to secure funding. During the first quarter of 2012, the Town of Kearny filed a petition with the New Jersey Meadowlands Commission (“NJMC”) to designate the area of and surrounding the Kearny plant as an area in need of redevelopment. In August 2012, the NJMC issued a technical report recommending such designation. The board of the NJMC voted in favor of the recommendation in September 2012 and directed the NJMC to prepare a redevelopment plan. The redevelopment plan, which was adopted on February 27, 2013, excludes residential uses. The NJMC indicated that it does not intend to use its powers of condemnation to take any properties in the redevelopment area but expects “market forces” to achieve redevelopment objectives. A request for proposals to redevelop the area was posted on the Hudson County Improvement Authority (“HCIA”) website on May 15, 2013 and five proposals were submitted. The Evaluation Committee rejected one proposal for non-compliance with the Redevelopment Plan. Of the remaining four proposals, three contained plans for use and acquisition of all three parcels on the peninsula including the former Diamond Site now owned by Tierra, the former Standard Chlorine Site now owned by the Town of Kearny and the former Koppers Site now owned by the HCIA. The one remaining proposal expressed interest only in the Standard Chlorine and Koppers Sites. The Evaluation Committee issued letters seeking clarification on certain matters, addressing RFP completeness and providing additional information. The Evaluation Committee continued during the fourth quarter of 2013 to meet and engage in discussions with prospective re-developers. The committee narrowed the field to two candidates with which direct negotiations are planned. Beyond confirming the interests of those candidates to move forward, no significant discussions have yet taken place, to our knowledge.

As of December 31, 2013, there is a total of approximately $17,3 million of environmental liability in connection with the foregoing chrome-related matters. Soil action levels for chromium in New Jersey have not been finalized, and the DEP continues to review the proposed action levels. The cost of addressing these chrome-related matters could increase depending upon the final soil action levels, the DEP’s response to Tierra’s reports, and other developments.

Painesville, Ohio - From approximately 1912 through 1976, Chemicals operated manufacturing facilities in Painesville, Ohio (the “Painesville Works Site”). The operations over the years involved several discrete, but contiguous plant sites over an area of approximately 1.300 acres (525 hectares). The primary area of concern historically has been Chemicals’ former chromite ore processing plant (the “Chrome Plant”). For many years, the site of the Chrome Plant has been under the administrative control of the EPA, pursuant to an AOC under which Chemicals is required to maintain a clay cap over the Chrome Plant site and to conduct certain ground water and surface water monitoring. Certain other areas have previously been clay-capped, and one specific site, which was a waste disposal site from the mid-1960s until the 1970s, has been encapsulated and is being controlled and monitored.

In 1995, the Ohio Environmental Protection Agency (OEPA) issued its Director’s Final Findings and Order (the “Director’s Order”) by consent, ordering that RI/FS be conducted at the former Painesville Works Site. OEPA has divided the Painesville Works Site into 20 operable units, including operable units related to groundwater. Tierra has agreed to participate in the RI/FS as required by the Director’s Order. Tierra submitted the remedial investigation report to the OEPA, which report was finalized in 2003. Tierra is submitting required feasibility reports separately. In addition, the OEPA has approved certain work, including the remediation of specific operable units within the former Painesville Works Site and work associated with the development plans discussed below (the “Remediation Work”). The Remediation Work has begun. As each operable unit within the Site receives the OEPA approval for additional projects related to investigation, remediation, or operation and maintenance activities, additional orders and agreements will be implemented, and additional amounts may need to be accounted for. Work continues to extend for five years the 1983 Chrome Site Order (US EPA), which terminated in July 2013. In addition, the Construction Documentation Report for the RD/RA Orders for OU2 and OU6 have been completed and approved by the Ohio EPA. The environmental covenants are already in place for these properties. Once the existing applicable orders are terminated, a decision can be made as to whether the parcels are eligible and should be enrolled in the Ohio Voluntary Action Program in order to receive a Covenant Not to Sue from the State of Ohio. The Painesville PRP Group is also performing additional work on OU1 (north river groundwater extraction system) and OU10 (one-acre site) pursuant to the 1995 DFFO for RI/FS work. More than 15 years ago, the former Painesville Works Site was proposed for listing on the National Priority List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA); however, the EPA has stated that the site will not be listed as long as it is satisfactorily addressed pursuant to the Director’s Order and OEPA’s programs. The site has not been listed. The Company has accounted for a total of approximately $17,8 million as of December 31, 2013, for its estimated share of the cost to perform the RI/FS, the Remediation Work, and other operation and maintenance activities at this site. The scope and nature of any further investigation or remediation that may be required cannot be determined at this time; however, as the RI/FS progresses, the Company will continuously assess the condition of the Painesville Works site and make any changes, including additions, to its environmental liability as may be required.

Tierra has entered into an agreement with a developer for the possible development and use of all or portions of this site. While the developer is proceeding with its development plans, there can be no assurance that this site will be successfully developed or that any productive use can be made of all or a portion of this site.

Greens Bayou - Pursuant to settlement agreements with the Port of Houston Authority (the “Port”) and other parties, Tierra and Maxus are participating (on behalf of Chemicals) in the remediation of property adjoining Chemicals’ former Greens Bayou facility where DDT and certain other chemicals were manufactured. Additionally, in 2007, the parties entered into a Memorandum of Agreement (“MOA”) with federal and state Natural Resources Trustees in connection with claims for natural resources damages. In 2008, the Final Damage Assessment and Restoration Plan/Environmental Assessment were approved specifying the restoration projects to be implemented. During the first semester of 2011, Tierra negotiated, on behalf of Occidental, a draft Consent Decree with governmental agencies of the United States and Texas addressing natural resource damages at the Greens Bayou Site. The Consent Decree was signed by the parties in January 2013 and a Notice of Lodging of Proposed Consent Decree under CERCLA was published in the Federal Register on January 29, 2013 and, after a 30-day comment period, became effective on April 3, 2013. Under the Consent Decree, the settlors agree to reimburse the United States and Texas for natural resource damage assessment costs ($31 to the federal trustees), to complete two restoration projects selected by the trustees valued at approximately $800 and to reimburse the trustees for any further monitoring or corrective action obligations after completion of construction of the restoration project.  The settlement includes a covenant not to sue under CERCLA.  The remediation activities were largely finished in 2009, but some minor closure activities, as well as ongoing operations and maintenance, are still in progress. As of December 31, 2013, the Company has accounted for approximately $3,6 million for its estimated share of remediation and MOA associated with the Greens Bayou facility.

Other Sites - In June 2005, the EPA designated Maxus as a PRP at the Milwaukee Solvay Coke & Gas Site in Milwaukee, Wisconsin. The basis for this designation is Maxus’s alleged status as the successor to Pickands Mather & Co. and Milwaukee Solvay Coke Co., companies that the EPA has asserted are former owners or operators of such site. In November 2006, five PRPs, including Maxus, entered into a joint participation and defense agreement, establishing the allocation costs for performing a RI/FS. Maxus is responsible for a significant share under this agreement. In January 2007, an Administrative Settlement Agreement and Order on Consent (AOC) for RI/FS was entered into by Maxus and the four other PRPs. Under the AOC, the PRP Group agreed to complete a RI/FS, which requires investigation of “upland” soil and groundwater, as well as sediment in the Kinnickinnic River. Limited field work at the site has been completed in 2012 as the PRPs have worked with EPA to evaluate the results of the investigation to date, identify remaining data gaps, and negotiate the scope of additional upland and sediment investigation activities. Ongoing discussions and disagreements regarding these issues led to EPA’s April 25, 2012 proposal regarding the scope of future sediment investigation, which was rejected by the PRP Group. The Group submitted a proposed Field Sampling Plan (FSP) on June 6, 2012 that included detailed plans for the remaining upland investigation and a phased approach to the sediment investigation. EPA responded in July 2012 to the FSP requiring expanded sediment sampling as part of the next phase of the investigation (including sampling near a recently discovered outfall on the “coal pile property” adjacent to the Site) and additional evaluation for the possible presence of distinct coal and coke layers on parts of the upland portion of the Site. In December 2012, the EPA approved the PRP Group’s revised Field Sampling Plan. During 2013, additional upland and sediment investigation activities continued pursuant to the approved Field Sampling Plan. The estimated cost of implementing the field work associated with the FSP is approximately $800. As of December 31, 2013 the Company has accounted for a total of $0,5 million associated with the Milwaukee Solvay site.

In September 2011, Occidental and Exxon Mobil received from EPA a CERCLA General Notice of Liability Letter and a 104(e) Information Request for the Black Leaf Chemical Site in Louisville, Kentucky. Occidental tendered to Maxus a request for defense and indemnity pursuant to the 1986 stock purchase agreement between Maxus and Occidental. Maxus accepted the tender, with all appropriate reservations and without conceding liability, in November 2011. The basis for the EPA’s action was that Diamond Alkali acquired the property from an Exxon Mobil affiliate and owned and operated the property as a pesticide formulating facility for a few years in the 1950s. During the first quarter of 2012, the EPA circulated a draft RI/FS AOC to Exxon Mobil and Maxus; negotiations are ongoing. In March 2013, EPA requested that Exxon and Maxus, on behalf of Occidental, perform soil remediation at 42 affected residential off-site properties, conduct further on-site investigations, and reimburse US EPA and the Kentucky regulator for their past response costs. In May 2013, US EPA and Kentucky DEP extended a settlement offer to Exxon and Maxus (acting on behalf of Occidental) pursuant to which they would make a payment to EPA and perform site investigation, and, if required site remediation, but would not be required to perform soil removal at 59 residential properties adjacent to the site. In July 2013, US EPA suspended the negotiations; in August 2013, US EPA and Kentucky DEP commenced off-site residential soil removal. Exxon and Maxus are currently in discussions with Kentucky DEP regarding performance of an environmental investigation of the Black Leaf site and have submitted a Remedial Investigation Work Plan to Kentucky DEP. As of December 31, Maxus lacks sufficient information to determine the potential exposure or costs, if any, it might have with respect to this site.

The Company has completed remediation activities at its former Tuscaloosa, Alabama facility. As of December 31, 2013 the Company has accounted for $5,8 million to address operation and maintenance activities for the future, estimated at approximately $0,2 million annually.

Maxus has agreed to defend Occidental, as successor to Chemicals, with respect to the Malone Services Company Superfund Site in Galveston County, Texas. This site is a former waste disposal site where Chemicals is alleged to have sent waste products prior to September 1986. The potentially responsible parties, including Maxus on behalf of Occidental, formed a PRP Group to finance and perform an AOC RI/FS. The RI/FS has been completed and the EPA has selected a Final Remedy, the EPA Superfund Division Director signed the Record of Decision on September 30, 2009. The PRP Group signed the Consent Decree in the second quarter of 2012, and it became effective in July 2012. During 2012 and 2013 the PRP Group proceeded with the planning and design phase with remediation expected to take place in 2014. As of December 31, 2013 the Company has accounted for approximately $0,8 million in connection with its obligations for this matter.

Chemicals has also been designated as a PRP by the EPA under CERCLA with respect to a number of third-party sites where hazardous substances from Chemicals’ plant operations allegedly were disposed or have come to be located. Numerous PRPs have been named at substantially all of these sites. At several of these, Chemicals has no known exposure. Although PRPs are typically jointly and severally liable for the cost of investigations, cleanups, and other response costs, each has the right of contribution from other PRPs, and as a practical matter, cost sharing by PRPs is usually affected by agreement among them. At a number of these sites, the ultimate response cost and Chemicals’ share of such costs cannot be estimated at this time. As of December 31, 2013, the Company has accounted for approximately $3,5 million in connection with its estimated share of costs related to these sites.

Black Lung Benefits Act Liabilities — The Black Lung Benefits Act provides monetary and medical benefits to miners disabled with black lung disease, and also provides benefits to the dependents of deceased miners if black lung disease caused or contributed to the miner’s death. As a result of the former operations of its coal-mining subsidiaries, the Company is required to provide insurance of this benefit to former employees and their dependents. The Company maintains a reserve to cover its estimate of these obligations.

Other Legal Liabilities and Proceedings — In 2001, the Texas State Comptroller assessed a Maxus subsidiary approximately $1,4 million in Texas state sales taxes for the period from September 1, 1995 through December 31, 1998, plus penalty and interest. In August 2004, the administrative law judge issued a decision affirming approximately $1,0 million of such assessment, plus penalty and interest. The Company believes the decision is erroneous, but has paid the revised tax assessment, penalty, and interest (a total of approximately $1,8 million) under protest. Maxus filed suit in Texas state court in December 2004, challenging the administrative decision. The matter will be reviewed by a trial de novo in the court action. Settlement negotiations are ongoing.

In 2002, Occidental sued Maxus and Tierra in state court in Dallas, Texas seeking a declaration that Maxus and Tierra have the obligation under the agreement pursuant to which Maxus sold Chemicals to Occidental to defend and indemnify Occidental from and against certain historical obligations of Chemicals, notwithstanding the fact that said agreement contains a 12-year cut-off for defense and indemnity obligations with respect to most litigation. Tierra was dismissed as a party, and the matter was tried in May 2006. The trial court decided that the 12-year cut-off period did not apply and entered judgment against Maxus. This decision was affirmed by the Court of Appeals in February 2008. Maxus’ petition to the Texas Supreme Court for review was denied. This decision required that Maxus accept responsibility for various matters for which it had refused to indemnify Occidental since 1998, which resulted in the incurrence of costs in addition to YPF Holdings’ current accrued for this matter. This decision also required Maxus to reimburse Occidental for past costs. In 2009, Maxus received a statement from Occidental of the costs Occidental believed to be due under the judgment, in the amount of $16,7 million. In March 2009, Maxus paid $14,9 million in respect of court costs, interests through the end of 2007 and estimates of future costs for which Maxus could become liable under the declaratory judgment. In September 2009, Maxus paid to Occidental $1,9 million. As of September 30, 2013, only approximately $0,3 million of disputed claims (relating to Occidental’s internal costs) remains pending. A significant category of claims refused by Maxus on the basis of its interpretation of the 12-year clause, were claims relating to “Agent Orange”. All pending Agent Orange litigation was dismissed in December 2009. Although it is possible that additional claimants may come forward in the future, it is estimated that no significant liability will result from this category of claims. In December 2012, OCC and Maxus learned that they had been named, together with the U.S. military and other parties, as defendants in a personal injury case filed in California, alleging exposure to Agent Orange on a U.S. military base in the 1980s. This case was dismissed and is no longer pending.

The remaining claims refused consist primarily of claims of personal injury from exposure to vinyl chloride monomer (“VCM”), and other chemicals, although they are not expected to result in significant liability. However, the declaratory judgment includes liability for claims arising in the future, if any, which are currently unknown as of the date of this report, and if such claims arise, they could result in additional liability.

In March 2005, Maxus agreed to defend Occidental, as successor to Chemicals, with respect to an action seeking the contribution of costs incurred in connection with the remediation of the Turtle Bayou waste disposal site in Liberty County, Texas. The plaintiffs alleged that certain wastes attributable to Chemicals found their way to the Turtle Bayou site. Trial for this matter was bifurcated, and in the liability phase, Occidental and other parties were found severally, and not jointly, liable for waste products disposed of at this site. Trial in the allocation phase of this matter was completed in the second quarter of 2007, and following post judgment motions, the court has entered a decision setting Occidental’s liability at 15,96% of the past and future costs to be incurred by one of the plaintiffs. Maxus appealed this matter and posted a supersedeas bond in the amount of approximately $3,1 million. In June 2010, the Court of Appeals ruled that the District Court had committed errors in the admission of certain documents, including the Smythe Report that had been prepared by OCC for purposes of confidential settlement discussions, and the Court of Appeals remanded the case to the District Court for further proceedings. Maxus took the position that the exclusion of the evidence contained in the Smythe Report should reduce OCC’s allocation by as much as 50%; in contrast, El Paso argued that there was sufficient evidence in the record to continue to justify the allocation of the District Court. During the period July through September, 2010, the District Court judge asked the parties to reach a negotiated settlement; however, the parties were not able to reach a settlement. The District Court issued its Amended Findings of Fact and Conclusions of Law in January 2011, requiring Maxus to pay, on behalf of Occidental, 15,86% of the past and future remediation costs of one of the plaintiffs. On behalf of Occidental, Maxus filed its notice of appeal in February 2011 and its appellant´s brief in June 2011. The U.S. Court of Appeals for the Fifth Circuit affirmed the District Court’s ruling in March 2012. Maxus paid to El Paso, on behalf of OCC, $2,0 million in June 2012 and $0,9 million in November 2012 covering El Paso’s past costs for the period 2007-2011. As of December 31, 2013, Maxus has accounted for $0,9 million with respect to this matter to cover liability of El Paso’s future costs at the Turtle Bayou site.

In May 2008, Ruby Mhire and others (“Mhire”) brought suit against Maxus and other third parties, alleging that various parties including a predecessor of Maxus had contaminated certain property in Cameron Parish, Louisiana, during oil and gas activities on the property; Maxus’ predecessor operated on the property from 1969 to 1989. The Mhire plaintiffs have demanded remediation and other compensation in excess of $150 million, based solely on plaintiff’s experts study. Maxus management presently believes that relatively little remediation activity is merited and intends to vigorously defend the case. Maxus has made appropriate responsive pleadings in the matter. On June 22, 2012, the parties in the case held a court-ordered mediation to discuss settlement. At this mediation, two of the five defendants reached a settlement with the plaintiffs. Plaintiffs were not able to reach a settlement with the remaining three defendants (Maxus, Chevron and El Paso).The discovery phase of the litigation and deposition of witnesses intensified in the fourth quarter of 2012 and first quarter of 2013. In December 2012, Maxus filed a motion requesting a change of venue, alleging that its due process rights would be injured if the case were tried in Cameron Parish. The Court scheduled oral arguments for February 2013, and the case was expected to go to trial in March 2013. However, the Court stayed the litigation to allow the parties time to negotiate an out-of-court settlement. On June 11, 2013, Maxus signed a Settlement Agreement with the plaintiffs pursuant to which Maxus shall make installments over three years and also perform remediation at the site. On July 31, 2013, the 38th Judicial District Court for the Parish of Cameron, State of Louisiana, approved the Settlement Agreement following receipt on July 8, 2013 of the No Objection Letter from the Louisiana Department of Natural Resources, Office of Conservation. In August 2013, pursuant to the Settlement Agreement, Maxus made an initial payment of $2 million and in December 2013, Maxus made a second payment of $3 million. As of December 31, 2013, Maxus has taken accounting reserves of $10,0 million with respect to this matter.

Reference should be made to the sections above captioned “Passaic River/Newark Bay, New Jersey” and “Hudson County, New Jersey” for a discussion of certain other litigation.

The Company, including its subsidiaries, is a party to various other lawsuits, the outcomes of which are not expected to have a material adverse effect on the Company’s financial condition. The Company has accounted for environmental liabilities for legal contingencies in situations where a loss is probable and can be reasonably estimated.

The Company has entered into various operating agreements and capital commitments associated with the exploration and development of it oil and gas properties, which are not material, except those of the Neptune Prospect. Total commitments for the Neptune field, located in the Atwater Valley area, consist of a minimum pipeline transportation payment obligation of $1,5 million for 2014; $1,3 million for 2015; $1,1 million for 2016 and $0,9 million thereafter.

1. SUBSEQUENT EVENTS

As of the date of the issuance of these financial statements, there are not significant subsequent events that require adjustments or disclosure in the financial statements of the Company as of December 31, 2013, if applicable, which were not already considered in those financial statements in accordance with IFRS.

On February 10, 2014 the Company received a capital contribution of US$ 65 million to pay it corresponding share in the Passaic Settlement Agreement with the State of New Jersey. Settlement mentioned in Note 7 to these Consolidated Financial Statements.

These consolidated financial statements were approved by Management and authorized to be issued on March 7, 2014.