YPF S.A. — Audit Report / Information 2015

Apr 5, 2016

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, 2015 and Comparative Information
Independent Auditor’s Report

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 THE YEAR ENDED DECEMBER 31, 2015 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	6-40

Independent Accountants Auditors’ Report

To the Board of Directors of

YPF Holdings Inc.

10333 Richmond Avenue - Suite 1050

Houston, 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, 2015 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 9.

The figures and other information as of December 31, 2014 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, 2015, 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

Without qualifying our opinion, we draw attention to Note 1 to the accompanying consolidated financial statements which indicate that as of December 31, 2015 and 2014, the Company presents shareholders’ deficit and its financial ability to afford its commitments depends on its Parent Company’s financial support or capital contributions. These conditions, along with the environmental contingencies to which the Company is exposed to as set forth in Note 8, indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

1. Restriction in use

The consolidated financial statements of the Company as of December 31, 2015, 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 3, 2016

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.)

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2015 AND COMPARATIVE INFORMATION

(In thousands of dollars)

ASSETS		12/31/2015			12/31/2014
NON-CURRENT ASSETS:
Intangible assets, net (Note 4.a)…………………………...			316		7,543
Property, plant, and equipment, net (Note 4.b)……………			33,916		55,857
Investments and Restricted cash (Note 4.c)……………….			22,070		22,180
Total non-current assets……………………………………..			56,302		85,580
CURRENT ASSETS:
Other receivables and prepayments……………………….			1,224		9,248
Accounts receivable (Note 4.d)……………………………			3,137		4,024
Investments and restricted cash (Note 4.c)………………..			7,111		6,351
Cash and cash equivalents…………………………………			20,992		1,127
Total current assets…………………………………………...			32,464		20,750
TOTAL ASSETS…………………………………………….	$		88,766	$	106,330

(Continued)

YPF HOLDINGS INC. AND SUBSIDIARIES

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

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2015 AND COMPARATIVE INFORMATION

(In thousands of dollars)

LIABILITIES AND STOCKHOLDER’S DEFICIT			12/31/2015				12/31/2014
STOCKHOLDER’S DEFICIT:
			---		Common stock, $0.01 par value – 810,614 shares issued		and outstanding……………………………………………….
Paid-in contributed capital…………………………………….			335,000				286,000
Accumulated other comprehensive income…………………..			1,457				1,630
Accumulated deficit…………………………………………..			(1,353,101)				(1,170,072)
Net loss………………………………………………………..			(61,895)				(183,564)
Total stockholder’s deficit…………………………...	$		(268,026)			$	(255,493)
NONCURRENT LIABILITIES:
Environmental and legal long-term liabilities (Note 8)……….			248,325				249,065
Accrued employee benefit plans……………………………...			21,763				24,731
Asset retirement obligations (Note 1)…..…………………….			35,223				33,605
Total non-current liabilities…………………………..	$		305,311			$	307,401
CURRENT LIABILITIES:
Environmental and legal short-term liabilities (Note 8)………			43,134				42,451
Accrued payroll, employee benefit plans
and related liabilities………………………………………..			3,743				4,788
Other accrued liabilities………………………………………			2,890				5,972
Accounts payable……………………………………………..			1,714				1,211
Total current liabilities……………………………….			51,481				54,422
TOTAL LIABILITIES……………………………………………			356,792				361,823
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT…….	$		88,766			$	106,330

(Concluded)

Accompanying notes are an integral part of these consolidated financial statements.

YPF HOLDINGS INC. AND SUBSIDIARIES

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2015 AND COMPARATIVE INFORMATION

(In thousands of dollars)

			Year ended December 31,
			2015		2014
REVENUES…………………………………………………		$	21,362	$		44,237
COST OF SALES-Production costs…………...……………			(31,127)		(24,042)
GROSS (LOSS) PROFIT…………………………………...			(9,765)			20,195
OPERATING EXPENSES:
Administrative and environmental expenses (Note 4.e)…….			(35,730)		(194,982)
Exploration expenses, and impairment and relinquishment of assets (Note 1)……………………………………………			(14,738)		(7,403)
OPERATING LOSS………………………………………...			(60,233)		(182,190)
FINANCE EXPENSES
Gain on assets……………………………………………..			16			12
Losses on liabilities……………………………………….			(1,678)			(1,386)
LOSS BEFORE INCOME TAXES…………………………			(61,895)		(183,564)
INCOME TAX EXPENSE………………………………….			-			-
NET LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS………………………………………………
	$	(61,895)	$	(183,564)
OTHER COMPREHENSIVE INCOME (LOSS)
Change in value of available-for-sale securities (1).................			(173)			92
Remeasurement of net defined pension benefit liability/ Actuarial Gain (2)……………………………………………			535			2,982
TOTAL COMPREHENSIVE LOSS FOR THE YEAR		$	(61,533)	$	(180,490)

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

Accompanying notes are an integral part of these 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, 2015 AND COMPARATIVE INFORMATION

(In thousands of dollars)

	2015
							Other				Total
	Subscribed		Capital				comprehensive		Accumulated		Stockholders’
	capital		contributions		Total		income-(loss)		Deficit		deficit
Balance as of January 1, 2015	810,513		286,000		1,096,513		1,630		(1,353,636)		(255,493)
Capital contribution from Parent Company	-		49,000		49,000		-		-		49,000
Net loss	-		-		-		-		(61,895)		(61,895)
Other comprehensive income (loss):
* Available-for-sale securities	-		-		-		(173)		-		(173)
* Remeasurement of defined pension liability/ Actuarial Gain	-		-		-		535		-		535
Reclassification – defined pension liability/ Actuarial Gain	-		-		-		(535)		535		-
Balance as of December 31, 2015	810,513		335,000		1,145,513		1,457		(1,414,996)		(268,026)
	2014
							Other				Total
	Subscribed		Capital				comprehensive		Accumulated		Stockholders’
	capital		contributions		Total		income-(loss)		Deficit		deficit
Balance as of January 1, 2014	810,513		170,500		981,013		1,538		(1,173,054)		(190,503)
Capital contribution from Parent Company	-		115,500		115,500		-		-		115,500
Net loss	-		-		-		-		(183,564)		(183,564)
Other comprehensive income (loss):
* Available-for-sale securities	-		-		-		92		-		92
* Remeasurement of defined pension liability/ Actuarial Gain	-		-		-		2,982		-		2,982
Reclassification – defined pension liability/ Actuarial Gain	-		-		-		(2,982)		2,982		-
Balance as of December 31, 2014	810,513		286,000		1,096,513		1,630		(1,353,636)		(255,493)

Accompanying notes are an integral part of these 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, 2015 AND COMPARATIVE INFORMATION

(In thousands of dollars)

		2015		2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss…………………………………………………………………	$	(61,895)	$	(183,564)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion, and amortization…………………………….		22,358		15,241
Asset impairment writedown Asset retirement obligation accretion………………………………....		13,379 1,680		- 1,290
Net relinquishment and retirement of non-current assets……………....		1,889		3,727
Environmental and legal expense………………………………………		25,771		185,224
Changes in assets and liabilities
Accounts receivable………………………………………………….		887		4,021
Other receivables and prepayments…………………………………..		8,024		(6,666)
Accounts payable and other accrued liabilities………………………		(2,579)		(4,446)
Accrued payroll, employee benefit plans and related liabilities……..		(3,478)		(2,916)
Environmental and legal liabilities…………………………………...		(25,828)		(94,117)
Asset Retirement Obligation…………………………………………		(96)		(17,725)
Interest and others…………………………………………………….		(99)		(371)
Net cash used in operating activities……………….		(19,987)		(100,302)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment………………………...		(8,423)		(20,648)
Increase in investments and restricted cash……………………………		(725)		(19)
Net cash used in investing activities……………………………….		(9,148)		(20,667)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from Parent Company…………………………………...		49,000		115,500
Loans received………………………………………………………....		-		4,500
Loans paid……………………………………………………………..		-		(4,500)
Net cash provided by financing activities…………………………		49,000		115,500
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS…………………………………………………		19,865		(5,469)
CASH AND CASH EQUIVALENTS — Beginning of year…..		1,127		6,596
CASH AND CASH EQUIVALENTS — End of year…………	$	20,992	$	1,127

Accompanying notes are an integral part of these consolidated financial statements.

YPF HOLDINGS, INC. AND SUBSIDIARIES

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF decEMBER 31, 2015 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, 2015 and 2014, the Company presents stockholder’s deficit and its financial ability to afford its commitments depends on its Parent Company’s financial support or capital contributions. These conditions, along with the environmental contingencies to which the Company is exposed to as set forth in Note 8, indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Application of International Financial Reporting Standards

The consolidated financial statements of YPF Holdings Inc. and its subsidiaries for the year ended December 31, 2015, are prepared in accordance with International Financial Reporting (“IFRS). The adoption of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) was determined by the Technical Resolution No. 26 (ordered text) issued by Argentina 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, 2015, 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 consolidated 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, 2015, the Company had $4.2 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, 2015, 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.

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. Management assesses the fair value of long-lived assets using commonly accepted techniques. For 2015, the Company compared both recent third party comparable sales and internally developed discounted cash flow analysis using the company’s cost of capital of 5%.

As a result of this comparison, for the year ending December 31, 2015, a $7.3 million impairment in oil and gas producing properties was recorded. The impairment was recognized as part of the $14.7 million in exploration expenses, and impairment and relinquishment of assets of the Statement of Comprehensive Income.

The Company’s Neptune Field Development achieved first production on July 6, 2008.  Production continues with seven subsea producing wells tied back to a central floating production facility located in Green Canyon 613. As of December 31, 2015, the field was producing an average of 8,862 bopd.  Approximately $285 million has been capitalized by the Company for the Neptune project as of December 31, 2015.  In July 2014 the Neptune consortium started the drilling of infill well SB-003, to develop reserves from the M9C and M10 reservoirs. The Neptune consortium completed the drilling and completion of well SB-003 in 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:

	12/31/2015		12/31/2014
Asset retirement obligations – beginning of year	33,605		33,956
Asset retirement obligations - increase	34		16,084
Accretion expense	1,680	1,290
Obligations paid	(96)	(17,725)
Asset retirement obligations – end of year	35,223		33,605

The asset retirement obligation was adjusted in 2015 and 2014 to reflect the additional cost required and the change in the scheduled abandonment date from 2017 to 2022, based on an internal reserve analysis and abandonment cost estimation from the operator of the joint venture. The Neptune consortium completed the required work of plugging and abandoning Neptune exploratory wells #3, #4, SD01 and SD02 during 2014.

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. We review investments in unproved properties periodically to determine whether impairment has occurred. The risk that we will be required to further write down the carrying value of our oil and gas properties increases when oil and natural gas prices are low or volatile. In addition, write-downs may occur if we experience substantial downward adjustments to our estimated proved reserves or our unproved property values, or if estimated future development costs increase.For 2015, the Company compared recent third party comparable sales and as a result for the year ending December 31, 2015, a $6.1 million impairment was recorded in unproved properties in the Northwood area in the Gulf of Mexico. The impairment was recognized as part of the $14.7 million in exploration expenses, and impairment and relinquishment of assets of the Statement of Comprehensive Income.

In the year ended December 31, 2015 and 2014, the Company relinquished certain interest rights in four leasehold blocks and twelve leasehold blocks, respectively, located in the Green Canyon, Atwater Valley and Mississippi Canyon areas in the Gulf of Mexico. The resulting effect was a net reduction in assets of $0.8 million and $3.2 million as of December 31, 2015 and 2014, respectively, disclosed as exploration expenses, and impairment and relinquishment in the Statement of Comprehensive Income.

During the year ended December 31, 2015, no other significant acquisitions or disposals have taken place.

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, 2015, the Company had $2.9 million deposited in trust funds and $ 21.3 million as security deposits for letters of credit (see additionally Note 8 - 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).

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 Federation of Professional Councils in Economic Sciences and the CNV applicable which have been applied by the Company as from the year beginning on January 1, 2015, are the following:

• Modifications to IAS 19 - Employee Benefits
• The annual improvements to IFRS (2010-2012 cycle) modify several standards, including amendments to IAS 16 (Property, Plant and Equipment), IAS 24 (Related Party Disclosures), IAS 38 (Intangible Assets), IFRS 2 (Shared-based Payment), IFRS 3 (Business Combinations) and IFRS 8 (Operating Segments), IFRS 13 (Fair Value Measurement).
• The annual amendments to IFRS (2011-2013 cycle) modify several standards, including amendments to IAS 40 (Investment Property), IFRS 3 (Business Combinations) and IFRS 13 (Fair Value Measurement).

The aforementioned adoption of standards, interpretations and related amendments did not have significant impact on these consolidated financial statements of the Company.

The 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, 2015 and that are not applied in advance to the effective date by the Company are the following:

• Modifications to IFRS 9 – Financial Intruments: effective for fiscal years beginning on or after January 1, 2018 with early application permitted.
• Modifications to IFRS 11 – Joint Arrangements: effective for fiscal years beginning on or after January 1, 2016 with early application permitted.
• Modifications to IFRS 14 – Regulatory Deferral Accounts: effective for fiscal years beginning on or after January 1, 2016 with early application permitted.
• Modifications to IFRS 15 – Revenue from Contracts with Clients: effective for fiscal years beginning on or after January 1, 2018 with early application permitted.
• Modifications to IAS 16 and 38 – Depreciation methods: effective for fiscal years beginning on or after January 1, 2016 with early application permitted.
• Modifications to IAS 16 and 41 – Agriculture / Bearer Plants: retrospectively effective for fiscal years beginning on or after January 1, 2016 with early application permitted.
• Modifications to IAS 27 – Separate Financial Statements: retrospectively effective for fiscal years beginning on or after January 1, 2016 with early application permitted.
• Modifications to IFRS 10 and IAS 28 – Investments in Asocciates and Joint Ventures: on August 10, 2015 the IASB proposed to postpone the effective date of this modifications indefenitely depending upon the results of its investigation project about the accounting of the equity method. This proposal was aproved on December 17, 2015.
• Modifications to IAS 1 – Presentation of Financial Statements: effective for fiscal years beginning on or after January 1, 2016 with early application permitted.
• Modifications to IFRS 10, IFRS 12 and IAS 28 – Exceptions on consolidating for Investments in Associates: effective for fiscal years beginning on or after January 1, 2016 with early application permitted.
• The annual improvements to IFRS (2012-2014 cycle) modify several standards, including amendments to IFRS 5 (Non-current Assets Held for Sale and Discontinued Operations), IFRS 7 (Financial Instruments), IAS 19 (Employee Benefits), and IAS 34 (Interim Financial Reporting).

The Company is currently assessing the impact of the application of the amendments and new standards.

1. FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS

There have been no changes in the risk management or risk management policies applied by the Company during the year.

1. ANALYSIS OF THE MAIN ACCOUNTS OF THE CONSOLIDATED FINANCIAL STATEMENTS

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

Balance Sheets as of December 31, 2015 and Comparative Information

1. NON-CURRENT – INTANGIBLE ASSETS

	2015		2014
Net book value of intangible assets	6,444		7,543
Allowance for impairment of intangible assets	(6,128)		-
	316		7,543

Changes in Company’s intangible assets as of December 31, 2015 and comparative information are as follows:

				2015
				Cost
Main Account				Beginning Balance				Increases				Net Transfers and Decreases				Ending Balance
Undeveloped Properties				7,996				-				(1,552)				6,444
Total 2015				7,996				-				(1,552)				6,444
Total 2014				12,775				-				(4,779)				7,996
		2015
		Depreciation
Main Account		Beginning Balance				Net Transfers and Decreases				Increases				Ending Balance				Net book value				Net book value 12/31/2014
Undeveloped Properties		(453)				776				(323)				-				6,444				7,543
Total 2015		(453)				776				(323)				-				6,444
Total 2014		(1,154)				1,536				(835)				(453)								7,543

1. NON-CURRENT – PROPERTY, PLANT AND EQUIPMENT

	2015		2014
Net book value of property, plant and equipment	41,167		55,857
Allowance for impairment of property, plant and equipment	(7,251)		-
	33,916		55,857

Changes in Company’s property, plant and equipment as of December 31, 2015 and comparative information are as follows:

		2015
		Cost
Main Account		Beginning Balance		Increases		Net Transfers and Decreases		Ending Balance
Neptune non-current inventory		3,581		14		(1,147)		2,448
Land and buildings		2,198		-		-		2,198
Asset Retirement Obligation		47,162		35		-		47,197
Producing Leases		277,028		-		8,112		285,140
Drilling and work in progress		-		8,112		(8,112)		-
Other property		20,251		297		(11,398)		9,150
Total 2015		350,220		8,458		(12,545)		346,133
Total 2014		314,427		36,732		(939)		350,220

		2015
		Depreciation
Main Account		Beginning Balance		Net Transfers and Decreases		Increases		Ending Balance		Net book value			Net book value 12/31/2014
Neptune non-current inventory		-		-		-		-		2,448			3,581
Land and buildings		-		-		-		-		2,198			2,198
Asset Retirement Obligation		(24,040)		-		(8,827)		(32,867)		14,330			23,122
Producing Leases		(251,357)		-		(12,716)		(264,073)		21,067			25,671
Drilling and work in progress		-		-		-		-		-			-
Other property		(18,966)		11,432		(492)		(8,026)		1,124			1,285
Total 2015	(294,363)		11,432		(22,035)		(304,966)		41,167
Total 2014		(280,412)		455		(14,406)		(294,363)					55,857

1. FINANCIAL ASSETS - INVESTMENTS AND RESTRICTED CASH

	12/31/2015				12/31/2014
	Non-current		Current		Non-current		Current
Investments	803		4,248		894		4,323
Trust Funds – restricted cash	21,267		2,863		21,286		2,028
	22,070		7,111		22,180		6,351

1. ACCOUNTS RECEIVABLE

			12/31/2015					12/31/2014
	Trade receivables and related parties (Note 5)		6,439					7,326
	Allowance for doubtful trade receivables		(3,302)					(3,302)
			3,137					4,024

Statements of Comprehensive Income for the years ended December 31, 2015 and comparative information

1. ADMINISTRATIVE AND ENVIRONMENTAL EXPENSES

	Years ended December 31,
	2015		2014
Environmental expense (Note 8)	18,685		28,889
Pension expense	70		608
Legal Expense (Note 8)	7,086		156,335
All other administrative expenses	9,889		9,150
	35,730		194,982

1. BALANCES AND TRANSACTIONS WITH RELATED PARTIES

The Company provides transactional support, environmental and technology consulting services, payroll and office space for affiliated companies. As of both December 31, 2015 and 2014 the Company had $0,5 million of accounts receivable from affiliated parties: YPF S.A and YPF Services USA Corp. An allowance for doubtful account has been accrued for $3,3 million in connection with a receivable from YPF pending the resolution of a dispute with a third party vendor. As of December 31, 2015 and 2014, the Company had no accounts payable with any affiliated companies.

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, 2015, current liabilities of $0.2 million and noncurrent liabilities of $2.3 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, 2015, current liabilities of $2.1 million and noncurrent liabilities of $13.8 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, 2015, and comparative information is as follows:

Defined – benefit obligations	12/31/2015		12/31/2014
Net present value of obligations	21,024		22,996

Changes in the fair value of the defined-benefit obligations	12/31/2015		12/31/2014
Liabilities at the beginning of the year	22,996		29,145
Service cost	-		-
Interest cost	957		608
Actuarial (gains)/losses	(535)		(2,982)
Benefits paid and settlements	(2,394)		(3,775)
Liabilities at the end of the year	21,024		22,996
Changes in the fair value of the plan assets	12/31/2015		12/31/2014
Fair value of assets at the beginning of the year	-		-
Expected return on assets	-		-
Actuarial (gains)/losses	-		-
Employer and employees contributions	2,394		3,775
Benefits paid and settlements	(2,394)		(3,775)
Fair value of assets at the end of the year	-		-

	Expenses
Amounts recognized in the Statement of Income	12/31/2015		12/31/2014
Service cost	-		-
Interest cost	(957)		(608)
Amendments	-		-
Total pension costs recognized Administrative Expenses	(957)		(608)

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

	Actuarial assumptions	2015			2014
	Discount rate	5.0%			5.0%
	Expected return on assets	N/A			N/A
	Expected increase in salaries	N/A			N/A
Estimated Contribution for the Year Ending December 31, 2016			$2,060

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

The weighted average duration was between 6.8 and 7.4 years for the following Projected Benefit Payments.

Projected Benefit Payments
Estimated Net Benefit Payments for the year ending December 31, 2016	2,060
Estimated Net Benefit Payments for the year ending December 31, 2017	1,977
Estimated Net Benefit Payments for the year ending December 31, 2018	1,950
Estimated Net Benefit Payments for the year ending December 31, 2019	1,830
Estimated Net Benefit Payments for the year ending December 31, 2020	1,716
Estimated Net Benefit Payments for the year ending December 31, 2021-2025	6,925

Sensitivity Analysis – OPEB Measured as of December 31, 2015

	Current Medical Trend Rate	1 % Increase	Percent Change
Defined Benefit Obligation	$15,931	$16,956		6.4%

	Current Medical Trend Rate	1 % Decrease	Percent Change
Defined Benefit Obligation	$15,931	$15,024		(5.7%)

	Current Discount Rate	1 % Increase	Percent Change
Defined Benefit Obligation	$15,931	$14,954		(6.1%)

	Current Discount Rate	1 % Decrease	Percent Change
Defined Benefit Obligation	$15,931	$17,052		7.0%

Sensitivity Analysis – SERP Measured as of December 31, 2015

	Current Discount Rate	1 % Increase	Percent Change
Defined Benefit Obligation	$2,456	$2,307		(6.0%)

	Current Discount Rate	1 % Decrease	Percent Change
Defined Benefit Obligation	$2,456	$2,625		6.9%

Various state and federal black lung benefits acts 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 responsible for the financial cost of claims for this benefit to former employees and their dependents. The Company maintains a reserve to cover its estimate of these obligations and is disclosed as non-current liabilities in the “Accrued employees benefit plans” account.

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 $261 million and $239.4 million as of December 31, 2015  and December 31, 2014, respectively, because they do not meet the criteria for recognition under IFRS.  The deferred tax assets correspond mainly to (a) temporary deductible differences of $157.1 million and $163.7 million as of December 31, 2015 and December 31, 2014, respectively; and (b) federal net operating loss carryforwards credits of $104 million and $75.7 million, as of December 31, 2015 and December 31, 2014, 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, 2015 and December 31, 2014 are as follows:

	12/31/2015		12/31/2014
Current:
Environmental liabilities	$42,309	$41,271
Legal liabilities	825		1,180
Total Environmental and other short term liabilities	$43,134		$42,451

Noncurrent:
Environmental liabilities		95,575		95,365
Legal liability		152,750		153,700
Total Environmental and other long term liabilities		248,325		249,065
Total Commitments and liabilities		$291,459		$291,516

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 historical 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” or “OCC”), 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.

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	12/31/2015			12/31/2014
Newark	$11.1			$13.2
Passaic River	52.4			51.5
Hudson County (Kearny)	48.5			42.6
Painesville RIFS	10.3			13.7
Greens Bayou	3.8			4.3
Tuscaloosa	4.0			3.6
Other Sites	7.8			7.7
	$137.9			$136.6

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.

Environmental Matters Related To Lister Avenue Site, Passaic River and Newark Bay

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. Operations and maintenance of the constructed remedy are ongoing.

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) indicated 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 confirmed that there will be no further obligations to be performed under the 1994 AOC. In the last semester of 2014, Tierra delivered its report to EPA (thereby completing phase one) and is currently awaiting EPA’s comments regarding the proposed work plan. Tierra estimates that the total cost to implement the CSO AOC is approximately $5.0 million and will take approximately two years to complete once EPA approves phase two (the work plan).

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 sought 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 asserted that the named entities are jointly and severally liable for the alleged natural resource damages without regard to fault. The DEP 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 called 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 were held; however, no agreement was reached.

In 2004, the EPA and Occidental entered into an administrative order on consent (“2004 AOC”) pursuant to which Tierra (on behalf of Occidental) 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 included 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. 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. The other parties have rejected Tierra’s proposal. At this time, YPF Holdings 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 mentioned above.

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 advised the recipients that (a) it engaged in discussions with the EPA regarding the subject matter of the directive, and (b) the recipients were not required to respond to the directive until otherwise notified.

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.

Removal Action Next to Lister Avenue Site

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 will involve 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 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. The removal work has and 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, 2015 it is not possible to make any predictions regarding the likelihood of success or the funds potentially recoverable in a cost-recovery action. The 2014 FFS published on April 11, 2014 provides that phase two of the removal action contemplated by the Removal AOC shall be implemented in a manner consistent with the FFS. By letter of September 18, 2014, the EPA requested that Tierra submit a work plan to conduct additional sampling of the Phase II area “on a more refined grid … [to] define the area of contamination more clearly.” The sampling was completed in the first quarter of 2015. The validated data was submitted to the EPA in August 2015. The EPA has not conveyed additional requests or required actions at this time

Focused Feasibility Study for Lower Eight Miles of the Passaic River

First Draft of FFS (2007)

In June 2007, the EPA released a draft Focused Feasibility Study (“2007 FFS”). The draft FFS outlined several alternatives for remedial action in the lower eight miles of the Passaic River, ranging from no action (which would result in comparatively little cost) to extensive dredging and capping in the lower eight miles of the river. Tierra, together with the other parties working under the 2007 AOC, submitted comments on the draft FFS to the EPA, as did a number of other interested parties, regarding the technical and legal flaws in the 2007 FFS. As a result of the comments received, EPA withdrew the FFS for revision and further consideration of the comments.

On November 14, 2013, at a Community Advisory Group (“CAG”) meeting, the EPA described the alternatives it was considering in the revised 2007 FFS. The EPA stated that the FFS would set forth four alternatives: (i) no action, (ii) deep dredging with backfill of 9.7 million cubic yards over 12 years (EPA estimated cost: $1.4 billion to $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, the CPG’s proposed remedy (EPA estimated cost: $0.4 billion to $0.6 billion, depending on whether there is a CAD or off-site disposal or local decontamination and beneficial use). EPA indicated that it had discarded alternative (iv) and its preferred remedy was alternative (iii).

Second Draft of FFS (2014)

A new draft FFS (“2014 FFS”) was published on April 11, 2014. It provided for an initial public comment period that began on April 21, 2014, after two extensions to date, ended on August 20, 2014. It was originally anticipated that the Record of Decision would be issued twelve to eighteen months after the FFS was made public. However, as of December 31, 2015, the Record of Decision has not yet been issued. The 2014 FFS contains the EPA’s proposed four remedial alternatives as well as EPA’s cost estimates for each alternative: (i) no action, (ii) deep dredging with backfill of 9.7 million cubic yards (EPA estimated cost: $1.34 billion to $3.24 billion, depending on whether the dredged sediment is disposed of in a confined aquatic disposal facility on the floor of Newark Bay (“CAD”), at an off-site disposal facility or is locally decontaminated and put to beneficial use); (iii) capping with dredging for flooding and navigation of 4.3 million cubic yards (EPA estimated cost: $1.0 billion to $1.73 billion, depending on whether there is a CAD or off-site disposal or local decontamination and beneficial use), (iv) focused dredging and capping for flooding of 1 million cubic yards (EPA estimated cost: $0.4 billion to $0.6 billion, depending on whether there is a CAD or off-site disposal or local decontamination and beneficial use). EPA’s preferred alternative is the third one, without a CAD, which calls for bank-to-bank dredging of approximately 4.3 million cubic yards of sediment in the lower 8.3 miles of the lower Passaic River and placement of an engineered cap consisting primarily of sand and stone. The dredged materials are to be dewatered and transported by rail to off-site incinerators and landfills depending on their characteristics. This EPA preferred remedy (without the CAD) has an estimated cost of $1.73 billion (net present value at a 7% discount rate).

On August 20, 2014, Maxus and Tierra, on behalf of OCC, filed its comments to the FFS with the EPA. The principal arguments made by Maxus, Tierra and OCC in the comments to the FFS were as follows:

• The 2014 FFS is not a legally authorized process for remedy selection of the type and size proposed by EPA for the lower 8 miles of the Passaic River

• The FFS is based on flawed site modeling

• The FFS overstates human health and ecological risk

• The proposed plan is not implementable or cost effective

• A lack of public transparency permeates Region 2’s processes

• The proposed plan’s inclusion of navigational dredging is unwarranted and unlawful

In addition to the comments received from Maxus and Tierra, EPA also received comments from approximately 400 other companies, institutions, government agencies, non-governmental organizations and private citizens, including the CPG, Amtrak (federal railroad company), NJ Transit, US Army Corps of Engineers, Passaic Valley Sewerage Commission, boat clubs, elected officials, and others.

At this time, EPA is reviewing all these comments and will publish its replies before EPA issues its Record of Decision (“ROD”) for the 2014 FFS, which will probably be issued sometime during 2016.

Parallel to their review of the 2014 FFS, Maxus and Tierra have been working on Project In-ECO, an ecologically friendly and sustainable bio-remediation alternative to the EPA’s preferred remedy of dredging and capping in the 2014 FFS. Maxus and Tierra submitted to EPA a Statement of Work for Project In-ECO in May 2014 EPA provided comments on the In-ECO Statement of Work in September. A revised In-ECO Statement of Work was submitted to EPA in November 2014. EPA provided additional comments to the In ECO Statement of Work in March 2015. Tierra developed responses to those comments and submitted them in the second semester. A meeting was held in September 2015 between Tierra, its experts, and the EPA. During this meeting the final issues were resolved and laboratory studies are anticipated to begin by early 2016.

Government Accountability Office Review of EPA’s Management of FFS Process -

In October 2015, the federal Government Accountability Office (“GAO”) informed Maxus, Tierra and OCC that it had initiated a study on a few select Superfund sediment sites across the United States, including the Lower Passaic River, at the request of the Senate Committee on Environmental and Public Works. GAO stated that it plans to speak to EPA leadership and project managers, as well as representatives from the community and PRP groups. Maxus, Tierra and OCC met with representatives of the GAO in November 2015. At this time, it is unknown what effect, if any, the GAO’s review will have on the timing or content of the Record of Decision for the FFS.

Conclusion

Based on the information available to the Company as of the issuance date of these financial statements, considering the uncertainties regarding the different remediation alternatives that could be incorporated into the final proposal and the associated costs of the same, the results of the studies and discoveries to be produced, the expenditures previously incurred by Maxus and Tierra on clean up in the area covered by the FFS, the quantity and diversity of potential responsible parties involved in the matter, the uncertainty regarding the potential allocation of removal costs, and also considering the opinion of external and internal legal counsel, 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 matter by the Company.

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. 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 would discuss other options for how they may comply with the 106 Order. Tierra, on behalf of Occidental, worked in the first quarter of 2014 to prepare a proposal for EPA regarding RM 10.9. On March 3, 2014, Tierra submitted a Statement of Work (“SOW”) for the conduct of surveys to more precisely locate two 72” water mains that cross under the Passaic River at RM 10.9. EPA granted conditional acceptance of the SOW, and Tierra in early April 2014 responded to EPA’s comments on the SOW. The field work for this investigation was conducted in August. This work was inconclusive and an additional field investigation began in December 2014 and was completed in February 2015. Tierra submitted to the EPA its report on the pipeline probing survey in March 2015. EPA extended the deadline for delivering financial assurance to March 14, 2014 and later further extended the deadline indefinitely.

RI/FS for Lower 17 Miles of the Passaic River

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 2016, following which EPA will select a remedy and notice it for public comment.

The CPG submitted the Draft Remedial Investigation and Feasibility Study for the Lower 17 miles of the Passaic River during the first semester of 2015. Separate sections were submitted over a 9- month period from February to October 2015. The EPA may or may not consider this report as they continue to address comments to the FFS.

Passaic River “Spill Act” Litigation

First Amended Complaint

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 sought 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.

Second Amended Complaint

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. 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 an equitable share of all cleanup and removal costs that Maxus and Tierra have incurred.

Third Amended Complaint

DEP filed its Third Amended Complaint in August 2010, adding Maxus International Energy Company and YPF International S.A. as additional named defendants. 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. 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.

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 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; 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; Tierra has Spill Act liability to the State based merely on its current ownership of the Lister Avenue Site; and 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.

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.

Occidental Motions for Partial Summary Judgment

In February 2012, plaintiffs and Occidental filed motions for partial summary judgment, seeking summary adjudication that Maxus has liability under the Spill Act. 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 each of Maxus and Tierra has direct liability for the contamination generated by the Lister Avenue site. 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. Maxus and Tierra have the right to appeal this issue.

The Court issued the Track VIII order on September 11, 2012. The Track VIII Order governed the process by which the Court would 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.

Fourth Amended Complaint

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.

Settlement Agreement between State of New Jersey, Repsol, YPF, Maxus, Tierra et al.

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

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.  On March 26, 2013, the State of New Jersey notified the Court that an agreement in principle between the State and necessary public and private entities had been reached. The respective Boards of Directors of each of YPF S.A., YPF Holdings, Maxus and Tierra approved the signing of Settlement Agreement with the State to partially settle the Spill Act litigation. The proposed Settlement Agreement, which was not an admission of any fact or liability but was offered solely for the purpose of settlement, was subject to a process of internal approvals, publication, comment period and final approval by the Court. 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. 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. Occidental’s appeal was decided on the merits and dismissed with prejudice. Occidental subsequently waived its right to seek an appeal to the New Jersey Supreme Court. Therefore, the settlement became final and non-appealable.

Settlement Agreement between State of New Jersey and Occidental

On July 22, 2014, the Court issued both

(a) Case Management Order XXIII governing the procedural schedule for Track IV (related to Occidental’s claims under the doctrine of “alter ego” between Maxus and its shareholders and for the transfer of assets by YPF and Repsol); and

(b) an “Order on the Approval Process for the Proposed OCC Final Consent Judgment” regarding a settlement framework to resolve the claims between the State of New Jersey and Occidental under Track VIII.

On December 16, 2014, the Court approved a Consent Judgment pursuant to which the State of New Jersey accepted to resolve all claims against Occidental related to environmental claims within a certain area of the Passaic River, New Jersey. In exchange, Occidental will pay $ 190 million in three installments, the last one due on June 15, 2015; and will have a contingent liability of up to $ 400 million in case the State of New Jersey is required to pay its share for future remediation actions.

On January 5, 2015, Maxus received a letter from Occidental, requesting that Maxus agree to indemnify Occidental for all of the settlement payments that Occidental agreed to make to the State of New Jersey. The Court previously issued an interlocutory order decision in 2011, which is subject to appeal after all trial proceedings are concluded, stating that Maxus had the contractual duty to indemnify Occidental for the liabilities under the New Jersey Spill Act arising from contaminants discharged into the Passaic River from the Lister Avenue Plant. Maxus responded on January 12, 2015, contending that whether and to what extent its obligation to indemnify Occidental applies to the settlement payments Occidental has agreed to make to the State of New Jersey pursuant to the Consent Judgment must await the outcome of further proceedings in the Passaic River litigation.

Occidental Third Amended Cross-Claims

On July 31, 2014, Occidental filed its Third Amended Cross-Claims on July 31, 2014. The other defendants moved, with the Court’s permission, to strike Occidental’s Third Amended Cross- Claims on the ground that the Judge’s scheduling pled in the cross claims that it had previously order does not permit Occidental to allege facts not filed, and Occidental has done so in violation of that order. Occidental argued that the Third Amended Cross-Claims incorporated new facts, not new causes of action. On October 28, 2014, Judge Lombardi rejected Occidental’s arguments and granted the motion to strike Occidental’s Third Amended Cross-Claims.

On November 12, 2014, the district court issued a new schedule (Case Management Order XXV) with discovery and litigation deadlines to resolve the so-called Track III proceedings (allocation of responsibility for contamination between Maxus and Occidental) and Track IV proceedings (Occidental’s claims alleging liability by YPF on grounds of alter ego and fraudulent transfer). Pursuant to this new schedule the following actions occurred, among others:

Motion to Dismiss--On November 24, 2014, YPF and Repsol submitted their motions to dismiss Occidental’s second amended complaint for failure to state a claim and based on the statute of limitations. Maxus and Tierra joined in these motions. On January 13, 2015, the Special Master issued a recommended decision accepting the defendants’ argument that Occidental’s claims of fraudulent conveyance based on asset sales that occurred in the period 1996-2002 were untimely because Occidental failed to bring its claims within the applicable limitations period and dismissing all claims except (a) Occidental’s declaratory judgment claim against Maxus regarding Maxus’s duty to indemnify Occidental (which was not the subject of the motions) and (b) Occidental’s contractual indemnification claims against Maxus, YPF and Repsol (the claims against YPF and Repsol are based on an alter ego theory of liability, that Maxus had no separate existence and was a mere instrumentality of YPF and Repsol, such that they should share in Maxus’s liability). On January 29, 2015, the presiding Judge affirmed the Special Master’s decision in its totality. Occidental did not appeal the decision by the Judge within the established 20-day period, but reserved such right to appeal at the end of the main process.

Answer to the Complaint—On February 14, 2015: YPF, Repsol and Maxus/Tierra Solutions Inc. (“Tierra”) filed their answers to Occidental Petroleum Corporation’s (together with Occidental Chemical Corporation, “Occidental” or “OCC”) complaint, including counter-claims against Occidental similar to those Maxus filed in response to Occidental’s First Amended Cross-Claims.

Case Management Order (“CMO”) XXVI—On March 9, 2015, the Court entered CMO XXVI, which extended certain deadlines under CMO XXV. CMO XXVI established deadlines for completion of domestic fact witness depositions (April 15, 2015), completion of foreign fact witness depositions (May 29, 2015), submission of expert reports (June 15, 2015 for affirmative experts and July 15, 2015 for responsive experts), and completion of expert depositions (September 15, 2015). Motions for summary judgment after completion of discovery were to be filed by October 15, 2015, and the trial date was set for January 11, 2016. These dates were subsequently changed as described below.

On March 26, 2015, a new presiding judge was appointed for the case.

On April 15, 2015, Occidental served Maxus with an indemnity demand letter asserting that Maxus is obligated to indemnify Occidental under the 1986 SPA with respect to the counter-claims asserted by Repsol against Occidental. Maxus replied to Occidental on April 28, 2015 reserving all arguments and defenses regarding the 1986 SPA’s indemnification provisions.

New Case Management Order; Depositions -

On July 1, 2015 the new Judge, issued CMO XXVII, which extended the deadline to complete all discovery to January 29, 2016, established a briefing schedule pursuant to which summary judgment will not be decided until late April or early May 2016, at the earliest, and included a provision that trial shall be scheduled in June 2016. On November 6, 2015 the Court entered a Consent Order to Amend Expert Discovery Schedule, amended by a November 30, 2015 Second Consent Order to Amend Expert Discovery Schedule, modifying the deadlines for exchange of expert reports and extending the deadline to complete all discovery to February 29, 2016. Depositions of domestic and international fact witnesses commenced in December 2014 in accordance with CMO XXV. Since that time nearly 40 witnesses have been deposed, including the corporate representatives of all parties which were completed in mid-October 2015. The issues that were explored included Track IV issues concerning the parent companies’ alleged control over Maxus and alleged fraudulent transfers and Track III issues concerning interpretation of the 1986 SPA between OCC and Maxus, the extent of Maxus’s indemnity obligation to OCC, and the operations of Chemicaland.

Motions for summary judgment -

CMO XXVII provides that summary judgment motions shall be filed in March 2016, following expert discovery. In September 2015, as requested by Repsol, the Special Master gave all parties permission to seek leave to file motions for summary judgment on legal issues that are ripe for adjudications. During the months of September and October 2015 the parties submitted their requests for leave, and their respective responses in opposition and replies.

The Special Master granted each party’s request for leave on October 13, 2015 and allowed all of the proposed motions for summary judgment. Opening briefs in support were filed on November 2, 2015, with opposition briefs filed on November 20 and replies filed on November 27. On December 10, 2015 the Special Master conducted oral argument on the motions for summary judgment, along with OCC’s motion to supplement its cross-claims (described below).

OCC filed a motion for summary judgment (i) declaring that Maxus is liable under the SPA for all liabilities relating to the Lister Site, even if caused by OCC conduct, (ii) declaring that Maxus breached the SPA by not indemnifying OCC for the full $190 settlement between OCC and the State, (iii) dismissing Maxus’s cross-claims against OCC seeking to allocate a portion of Lister Site liabilities to OCC, and (iv) dismissing Repsol’s counterclaims against OCC seeking reimbursement of the $65 million that Repsol paid to the State pursuant to the RYM Settlement Agreement. OCC’s summary judgment filing against Maxus only specifically addressed the argument that Maxus is responsible for all Lister Site liabilities under the SPA. If successful on this limited motion OCC will also argue that Maxus is therefore liable for the full $190 million settlement payment to the State and Maxus’s cross-claims should be dismissed (though it would not prevent Maxus from arguing that the OCC settlement amount was unreasonable). On January 15, 2016, the Special Master issued recommended decisions as follows:

(a) Granting OCC’s motion for summary judgment against Maxus and finding Maxus liable under the SPA for all liabilities relating to or arising out of the Lister Site, even if caused by OCC conduct. The Special Master recognized that Delaware law requires specific language obligating an indemnitor to indemnify the indemnitee for the indemnitee’s own conduct. However, the Special Master ruled that this requirement would only apply to indemnity language addressing allocation of liabilities for the parties’ conduct. In this case, the “Inactive Sites” provision in the SPA does not address conduct. Rather, the Special Master ruled that the requirement was satisfied because the “Inactive Sites” provision in the SPA is site-based—an indemnity for liabilities relating to the listed sites (including the Lister Site), in which the contractual language states that it specifically covers all related liabilities. The Special Master also held that OCC’s prior statements in this case and the prior Dallas litigation that it was not seeking and never sought indemnity from Maxus for OCC’s own conduct did not give rise to judicial estoppel because OCC’s own conduct was not previously at issue. As a result of this decision, Maxus’s arguments in Track III regarding Chemicaland’s discharge of hazardous substance and Maxus’s cross-claims seeking to allocate a portion of Maxus’s past costs to Chemicaland are no longer at issue in the case. The Chemicaland share of liability also will not be relevant to allocation of the $190 million settlement between OCC and the State. However, OCC will still be required to establish that the settlement amount was reasonable given the claims remaining against it. Maxus submitted expert reports on January 21, 2016 as to why the amount was not reasonable.

(b) Granting in part and denying in part OCC’s motion for summary judgment seeking dismissal of Repsol’s cross-claims. The Special Master found that Repsol could proceed with its Spill Act contribution claims against OCC, but Repsol’s unjust enrichment claims against OCC should be dismissed. Repsol will remain in the case for purposes of prosecuting its contribution cross-claim against OCC for the $65 million. To the extent Repsol establishes that OCC is a Spill Act liable party based on discharges of hazardous substances from the Lister Site, it is anticipated that OCC will argue that it is entitled to indemnification from Maxus for any amount recovered by Repsol against OCC.

Maxus filed for summary judgment dismissing OCC’s claims for a declaratory judgment that Maxus is liable for all future costs in the NBC relating to the Lister Site. YPF S.A. filed for summary judgment arguing that (1) OCC is not entitled to any purported damages arising out of the 1995 acquisition financing transactions (approved before YPF S.A. had any interest in Maxus) or the 1996 transactions (which proceeded with the approval of the majority of independent directors over whom YPF S.A. did not have control); (2) because OCC’s fraudulent transfer claims are time-barred under the statute of limitations/statute of repose and have already been dismissed by the Court, OCC cannot rely on those transfers to support its alter ego claims; and (3) Tierra’s 1996 assumption of Maxus’s SPA indemnity obligations did not damage or harm OCC because Maxus still remained directly liable and therefore it cannot provide a basis for alter ego liability. Repsol filed for summary judgment dismissing all of OCC’s claims against Repsol because (1) Maxus satisfied all of its indemnity obligations to OCC during Repsol’s ownership of YPF S.A.; (2) Maxus was allegedly already insolvent before Repsol acquired its interest in YPF S.A. in 1999 and therefore no damages could have been caused by Repsol’s alleged wrongful conduct; and (3) alter ego claims based on transactions between 1999 and 2002 are barred by the statute of repose. On January 15, 2016, the Special Master issued recommended decisions as follows:

(x) Granting Maxus’s motion and dismissing OCC’s declaratory judgment claims regarding future costs. The Special Master recognized that there is no way of knowing the facts giving rise to OCC’s future liabilities (for example, potential liability arising out of OCC’s connection to the Givaudan site) until the claim is made, and litigating now would not resolve future disputes in that regard. The Special Master also noted that Maxus, with the benefit of the SPA interpretations in this litigation, may not even decide to dispute its obligation to indemnify OCC for future costs. This decision has the effect of limiting the potential damages recoverable by OCC in this action to the $190 million settlement amount it paid to the State, plus OCC’s attorney’s fees.

(y) Denying YPF S.A.’s motion for summary judgment.

(z) Granting Repsol’s motion for summary judgment and dismissing OCC’s alter ego claims against Repsol.

The Special Master’s recommended decisions on the motions for summary judgment and OCC’s motion for leave to supplement its Cross-claims are recommended decisions only and do not represent the final decision of the Court. On February 16, 2016, (i) Maxus appealed the recommended decision granting OCC’s motion for summary judgment against Maxus; (ii) YPF appealed the recommended decision denying its motion for summary judgment against OCC; and (iii) OCC appealed the recommended decisions granting Repsol’s motion for summary judgment dismissing OCC’s claims against Repsol, granting Maxus’s motion to dismiss OCC’s declaratory judgment claims for future costs, denying OCC’s motion for summary judgment seeking dismissal of Repsol’s cross-claims against OCC, and denying OCC’s motion to supplement Cross-claims. In accordance with applicable case management orders, the parties submitted a 5-page letter brief explaining the basis for each appeal. The appeals are currently pending before the presiding judge, the Hon. Garry J. Furnari.

In light of the Special Master’s recommended decisions, OCC and Repsol sought a stay of all discovery and other case management deadlines pending the Judge’s ruling on the appeals. During a February 10, 2016 conference call the Judge rejected the request for a stay of all discovery and instructed the parties to submit an order providing for discovery to proceed with regard to experts whose reports were not rendered unnecessary by the Special Master’s recommended decisions. Entry of the order is pending; in the meantime the parties have agreed to proceed as if it will be entered. All remaining depositions will be stayed pending the outcome of the Court’s review of the Special Master’s recommended decisions (unless the Judge does not enter the parties’ proposed partial stay order, in which case those depositions will be rescheduled). In addition, the Special Master is considering whether to postpone the March 4, 2016 summary judgment deadline.

Occidental Third Amended Cross-Claims -

OCC submitted a request for leave to file a motion to amend its Second Amended Cross-Claims on September 25, 2015. OCC sought to add claims against YPF and Repsol for tortious interference with OCC’s contractual rights under the SPA. The Special Master granted the request for leave to file the motion on October 13 and set the same briefing schedule as the motions for summary judgment. The Special Master heard oral argument on this motion at the same time as the motions for summary judgment. On January 15, 2016, the Special Master denied OCC’s motion to amend its Second Amended Cross-Claims.

Expert Reports –

On October 23, 2015 Maxus, Repsol and OCC each submitted expert reports in support of their respective cross-claims. On December 14, 2015, Repsol and YPF submitted expert reports in response to OCC’s Track IV reports, and OCC submitted expert reports in response to Maxus and Repsol’s Track III expert reports (Maxus relied on its initial October 23, 2015 reports in response to OCC’s initial expert reports). Rebuttal reports were submitted on January 21, 2016.

Conclusion

As of December 31, 2015, for all matters under the heading “Environmental Matters Related to Lister Avenue Site, Passaic River and Newark Bay,” there is a total of approximately $215.5 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, the impossibility of reasonably estimating the liability or range of liability for the eventual costs of the FFS previously mentioned, an estimated cost (subject to further analysis and revision when more facts are known) related to the settlement value of OCC’s claim against Maxus for indemnification of OCC’s Consent Judgment with the State of New Jersey, 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.

Considering the information available to the Company as of the date of issuance of these Consolidated Financial Statements; the results of studies and testing phase; as well as the potential liability of the other parties involved in this issue and the possible allocation of the removal costs; and considering the opinion of our internal and external legal advisors, the management of the Company has not accrued additional amounts than the mentioned above and that could emerge as a result of the conclusion of the aforementioned issues and consequently to be reasonably estimated.

Other Environmental Matters Not Related to the Passaic River

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 required investigation and remediation work at 40 chromite ore sites in Hudson and Essex Counties alleged to be impacted by the Kearny Plant operations.

Maxus and Tierra, on behalf of Occidental as successor to Chemicals, are currently engaged in managing remediation work and providing financial support for Occidental’s share of the investigation and remediation of these sites. Additionally, Maxus and Tierra have provided financial assurance in the amount of $20 million in respect of this work. However, the final cost of the clean-up cannot be reliably estimated.

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 was 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 sites, treble damages. DEP demanded of the defendants joint and several responsibility for the remediation of the majority of the sites. In February 2008, the parties reached an agreement in principle, pursuant to which Tierra would pay, on behalf of Occidental, $5 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 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 26 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. Tierra is currently performing work pursuant to the Master Schedule, the most salient activities being commencement and completion of scope of work for field work at six sites, implementation of the remedial action planning phase for at least eight sites and preparation and/or submission of remedial action work plans to initiate remedial action at approximately seven sites.

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 entered into an agreement that addressed the concerns of the environmental groups, and these groups agreed not to file suit. After the original agreement expired, the parties entered into a new Standstill Agreement, effective March 7, 2013.

Standard Chlorine Chemical Company Superfund Site – In 2013, the Standard Chlorine Site Cooperating Parties Group (including Maxus on behalf of Occidental) entered into a CERCLA Administrative Order on Consent with EPA. This Consent Order required the Cooperating Parties Group to fund and perform a Site RI/FFS. The RI was completed during 4Q2014 and EPA approved the RI Report in October 2015. The draft FFS was submitted to EPA during 3Q2015. The Site Cooperating Parties Group received EPA’s initial comments on the FFS on October 1, 2015. The revised FFS is due to EPA on March 11, 2016. As of December 31, 2015, Maxus had reserved $1.7 million for known probable and reliably estimable Site related losses to allow continued response for this matter on Occidental’s behalf.

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 sought 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 acknowledged that it is required to investigate and prevent chrome releases from certain upland sites into the river, the PRG contended 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.

As of December 31, 2015, there is a total of approximately $48.5 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

According to EPA and the Ohio Environmental Protection Agency “OEPA”, from approximately 1912 until 1976, Chemicals or its predecessors owned or operated various industrial manufacturing facilities on approximately 1,300 acres (525 hectares) of land located adjacent to Lake Erie in or near Painesville, Ohio (the “Painesville Site”). During this time period, significant operations included, among others, the manufacturing of soda ash, chromium chemicals, coke, chlorine and carbon tetrachloride. Additionally, Chemicals’ or its predecessors’ research laboratories were located at the Painesville Site.

During the early 1980’s EPA or OEPA first notified Chemicals, Maxus and others of their potential environmental liability associated with alleged releases or threatened releases of certain hazardous substances associated with their manufacturing operations at the Painesville Site. Since that time, numerous State and Federal environmental regulatory orders have been issued to the PRPs requiring the funding and performance of various environmental investigation and remedial actions. All such actions have been performed under EPA or OEPA oversight. Since 1986, Maxus has continued to respond to Painesville Site environmental liabilities on Occidental’s behalf pursuant to the indemnification obligation arising pursuant to the 1986 Stock Purchase Agreement. Tierra currently owns most of the Painesville Site real property.

Painesville Site environmental liabilities are currently being addressed under three (3) governmental orders: (i) the 1983 EPA RCRA Administrative Consent Order (the “1983 RCRA ACO”); (ii) the 1995 OEPA Director’s Final Findings and Orders (the “1995 DFFO”), and; (iii) the 2006 OEPA Director’s Final Findings and Orders (the “2006 DFFO”). Moreover, due to its large size, OEPA divided the Painesville Site into approximately twenty-three (23) distinct Operable Units (“OU’s”). Each of the OU’s is governed by either the 1983 ACO, 1995 DFFO or 2006 DFFO. The costs associated with the performance of work under these orders are borne solely by Maxus or shared with other PRPs in accordance with existing applicable participation and/or cost sharing agreement(s).

Additionally, in 2011 Tierra entered into a development agreement and long-term ground lease with a “brownfields” real estate developer (collectively, the “Master Development Plan”). The Master Development Plan covers most of the 1300 acres of the Painesville Works Site. Provided below is brief discussion of the requirements of 1983 RCRA ACO, 1995 DFFO and 2006 DFFO, and their relationships with the various OUs. Also included below is a brief discussion of the Master Development Plan.

• 1983 EPA RCRA Section 3013 Administrative Consent Order: As previously reported, historically, EPA and OEPA’s primary area of concern at the Painesville Site has been Chemicals’ former chromite ore processing plant. In 1983, Diamond Shamrock Corporation entered into a RCRA Section 3013 Administrative Consent Order under which Diamond Shamrock Corporation agreed to fund and perform certain environmental investigation, remediation and continuing maintenance and monitoring activities related to this former chromite ore processing plant. As of December 31, 2015, Maxus continues to fund and perform groundwater extraction and treatment, and operation and maintenance activities, as required of Diamond Shamrock Corporation under the 1983 RCRA ACO.

• 1995 OEPA Director’s Final Findings and Orders: In 1995 the OPEA issued its Director’s Final Findings Orders to Occidental, Maxus, Tierra and others, requiring that Occidental, Maxus and Tierra fund and perform an OEPA Remedial Investigation/Feasibility Study (“RI/FS”) for each of the following OUs, No’s: 1N, 1S, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 18, 19, 20, 21 and 22. As of December 31, 2014, Maxus continues to fund and perform certain RI/FS activities for each of these OUs as required of Occidental, Maxus and Tierra under the 1995 DFFO; except, for OU-2 and OU-6 where Tierra has completed the RI/FS, and OU-19 where OPEA has suspended further enforcement of the 1995 DFFO against each of Occidental, Maxus and Tierra.

• 2006 OEPA Director’s Final Findings and Orders: In 2006 the OPEA issued its Director’s Final Findings Orders to Occidental, Tierra and others, requiring that Occidental and Tierra fund and perform an OEPA Remedial Design/Remedial Action (“RD/RA”) for OU-2 and OU-6. As of December 31, 2015, Maxus continues to fund and perform RD/RA activities for OU-2 and OU-6 as required of Tierra and Occidental under the 2006 DFFO.

• 2001 Master Development Plan: In 2001, Tierra entered into two (2) agreements which define the Master Development Plan: (i) a 99-year “Ground Lease” covering most of the Painesville Site, and; (ii) a development agreement. The stated purpose of the Master Development Plan is the redevelopment, subdivision, marketing and disposition of the leased premises in accordance with a master plan approved by Tierra. The development agreement was made with Hemisphere Corporation, an Ohio based “brownfields” real estate developer who would serve as the “Development Manager”. The ground lease was made with Lakeview Bluffs, LLC, an affiliate of Hemisphere Corporation. As of December 31, 2015, no significant development activities are presently occurring, or are planned for the future, at the Painesville Site. Management considers there is considerable uncertainty regarding the final outcome of the Master Development Plan, and based on current information, at this time there can be no assurance that the Painesville Site will be successfully developed in whole or in part, or that any future productive use of the Painesville Site will ever be realized.

During 3Q 2015 the final remedies for Operable Units 2 and 6 were completed; Ohio EPA approved these remedy completions in July 2015 and terminated the applicable State Administrative Orders. Also in July 2015, OPEA issued its Preferred Remedial Plan for OU-5. As of December 31, 2015, the Painesville PRP Group (including Tierra and Maxus on behalf of Occidental) continues to move forward with the funding and performance of Feasibility Studies for each of the remaining Operable Units and the performance of individual Operable Unit remedies as they are selected by OPEA. Further, Maxus, on behalf of Occidental, continues to fund and perform groundwater extraction and treatment, and operation and maintenance activities, as required under the 1983 RCRA Administrative Consent Order.

As of December 31, 2015, the Company has reserved approximately $10.3 million for known probable and reasonably estimable Painesville Site environmental liabilities.

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, to complete two restoration projects 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 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, 2015, the Company has accounted for approximately $3.8 million for its estimated share of remediation and MOA associated with the Greens Bayou facility.

Other Sites

Milwaukee Solvay Site. 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. On, April 25, 2012, EPA made a 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 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 $0.8 million.

In February 2014, the PRP Group submitted to EPA and Wisconsin Department of Natural Resources (“DNR”) a Baseline Human Health Risk Assessment (“BHHRA”) Scoping Document, an Upland Screening Level Ecological Risk Assessment (“SLERA”) Scoping Document and an Aquatic Baseline Ecological Risk Assessment (“BERA”). Currently, additional upland and sediment investigation activities continued pursuant to the approved FSP.

In June 2014, the PRP Group submitted to EPA and WDNR the draft Remedial Investigation (“RI”) Report and risk assessment documents (i.e., Baseline Human Health Risk Assessment, Screening Level Ecological Risk Assessment, and Aquatic Baseline Ecological Risk Assessment) and a Remedial Action Objectives Technical Memorandum. Comments to the draft RI Report were received in October 2014. In accordance with the timeline established by the Agencies, in November 2014 the PRP Group submitted written responses to the EPA/WDNR comments concerning the draft RI and risk assessment documents. The PRP Group received approval from EPA to defer preparation of responses to the comments on the draft RAOs until after the RI has been approved. EPA commented on the RI Report in November 2015, and the PRP Group submitted a revised RI Report in December 2015. As of December 31, 2015 the Company has accounted for a total of $0.3 million associated with the Milwaukee Solvay site. The principal pending issue revolves around whether EPA and WDNR will require that the investigation be extended to the sediment in the Kinnickinnic River. The Company does not have sufficient information at this time to reliably estimate the additional costs that might arise.

Black Leaf Chemical 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. As of December 31, 2015, however, there is no definitive legally binding agreement among the PRPs regarding cost sharing, although there is a preliminary agreement in principle under which Occidental/Maxus would have a relatively small share. In October 2013, the Black Leaf Site PRPs (including Maxus on behalf of Occidental), acquiesced to Kentucky Department of Environmental Protection (“KDEP”) request to fund and perform an “On-Site” environmental investigation of the Black Leaf Site This “On-Site” investigation was completed and reported to KDEP during 2014. In October 2015, KDEP approved the responding PRPs’ Site Characterization Report and requested that the PRPs prepare and submit to KDEP a Site Corrective Action Plan. The Black Leaf Site PRPs submitted the requested Site Corrective Action Plan to KDEP in January 2016 and is awaiting comments. As of December 31, 2015, the Company has accounted for approximately $1,6 million for its estimated share of remediation for the Black Leaf Site.

Tuscaloosa Site. The Company has completed remediation activities at its former Tuscaloosa, Alabama facility. As of December 31, 2015, the Company has accounted for $4 million to address operation and maintenance activities to be performed.

Malone Services Site. 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, 2013, 2014 and 2015 the PRP Group proceeded with the planning and design phase and remediation. As of December 31, 2015 the Company has accounted for approximately $0.4 million in connection with its obligations related to this matter.

Central Chemical Company Superfund Site (Hagerstown, Maryland) –

The Central Chemical PRP Group has been responding to this federal Superfund Site since the early/mid 1990s. The PRP Group consists of parties who EPA alleges are former Central Chemical Company customers (or who are the legal successors thereof) which arranged for the disposal of certain CERCLA hazardous substances at the Site. Maxus participates in the PRP Group on behalf of Occidental. In 1998, the EPA entered into a CERCLA Administrative Order on Consent with certain PRPs to conduct an RI/FS. The PRP Group, including Maxus, on behalf of Occidental, funded and performed the RI/FS, which was completed in 2007. In 2009 the EPA issued its Record of Decision which selected the final Site remedy. In 2010, EPA divided the Site into two Operable Units: “Operable Unit 1” (OU-1) – Site soils, waste and shallow groundwater, and; “Operable Unit 2” (OU-2) - bedrock groundwater. In September 2012, the EPA issued CERCLA Special Notice Letters to the PRPs, including Occidental, requesting that they fund and perform the Site OU-1 remedy. In August 2013, the PRP Group members, including Occidental, entered into a CERCLA Administrative Order on Consent to fund and perform the Remedial Design for Operable Unit 1. In early 2014, the PRP Group and the EPA began negotiations of a judicial Consent Decree for the funding and performance of the Remedial Action for Operable Unit No. 1 During 3Q 2015, the Central Chemical PRP Group members (including Maxus on behalf of Occidental) entered into a judicial Consent Decree for the funding and performance of the OU-1 Remedy (the “OU-1 Consent Decree”). The OU-1 Consent Decree was approved and entered with the court in October 2015. Performance of the Remedial Action for Operable Unit No. 1 is currently forecasted to occur between 2016 and 2021; and according to EPA, is estimated to cost approximately $14.2 million. In addition, the EPA may also require the Central Chemical PRP Group to initiate a Remedial Design/Remedial Action for Operable Unit 2 in 2016 or 2017; which the PRP Group has estimated could cost at least $3 million. As of December 31, 2015, Maxus had reserved $1.3 million for known probable and reliably estimable Site related losses to allow continued response for this matter on Occidental’s behalf.

Other Third Party Sites. 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. 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, 2015, the Company has accounted for approximately $3.7 million in connection with its estimated share of costs related to these sites.

Other Legal Liabilities and Proceedings

Texas State Sales Tax. 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.

Occidental claim for indemnification of historical obligations.

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. 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”. With the exception of one Agent Orange claim filed in 2012 and dismissed in 2013, 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.

French Agent Orange Case. In July 2014, Madame Tran To Nga, a French national of Vietnamese origin, filed a claim in the Regional Court of Evry, France against 26 corporations, among which were included Dow Chemical Company, Monsanto Company, Diamond Shamrock Chemical Company, Occidental Electrochemicals Corporation, Occidental Chemical Corporation, Hooker Chemical Corporation, Chemical Land Holdings, Inc. (which subsequently became Tierra Solutions, Inc.), Maxus Energy Corporation, and Diamond Alkali Company. The claim alleges that Madame Tran To Nga, who worked as a journalist, suffered personal injury from her exposure to Agent Orange during the Vietnam War. She also alleges that her children have suffered congenital birth defects caused by Agent Orange. On September 9, 2014, Occidental Petroleum Corporation notified Maxus of the claim made by Madame Tran To Nga against Occidental Chemical Corporation and Occidental Electrochemicals Corporation, tendered defense of and demanded indemnification in the matter by Maxus pursuant to the SPA. On October 2, 2014, Maxus responded to Occidental’s tender for defense and indemnification by electing to assume the defense of Occidental Chemical Corporation (“OCC”) and Occidental Electrochemicals Corporation (“OEC”) but only to the extent, if at all, the plaintiff asserts claims against them based on their being successors of the corporation previously named Diamond Alkali Company, Diamond Shamrock Corporation and Diamond Shamrock Chemicals Company (collectively, “DSCC”). To the extent OCC and/or OEC are being pursued in the Nga Litigation in their own capacity, or based on conduct that post-dates the Stock Purchase Agreement of September 4, 1986, or as the successors or affiliates of some entity other than DSCC (including, without limitation, Hooker Chemicals & Plastics Corporation, Hooker Chemical Corporation, Hooker Chemical Far East Corporation and/or Hooker Chemicals Company), Maxus does not elect to assume the defense of OCC or OEC with respect to such capacities or conduct, and specifically reserves the right to seek reimbursement from OCC of costs paid or incurred in connection therewith. Afterwards, OCC notified Maxus that OCC is assuming its own defense of the claim. With respect to plaintiff’s claims against Maxus and Tierra, Maxus intends to defend the case. At this time, it is too early in the case to give an accurate assessment of either the existence or amount of the potential liability. The first procedural hearing in the case took place on January 15, 2015. At a case management conference held on June 18, 2015, the pre-trial judge asked the parties whether they intended to present procedural or non-admissibility arguments. Some defendants argued that before answering these questions, they needed the claimant to produce more exhibits on the merits of her claim. As a result, the pre-trial judge accepted to schedule a calendar for disclosure of exhibits by Ms. Tran To Nga. In accordance with this calendar, Dow Chemical, Monsanto, Occidental/Hooker, Riverdale, TH Agriculture, and Wyeth filed submissions by July 15 requesting the disclosure of many documents relating to the medical situation of the claimant. Maxus requested the disclosure of evidence of the French citizenship of the claimant, which is the basis for her bringing the law suit in France against US companies. Ms. Tran To Nga filed reply submissions on September 15, refusing to disclose other documents than translations into French of yet disclosed documents (such as press articles, court decisions and witness testimonies); however, she disclosed the proof of her identity and French citizenship (as requested by Maxus). The defendants filed submissions in reply by October 10. The pre-trial judge heard the parties about the disclosure of exhibits on October 15. On November 5, 2015, the pre-trial judge released Wyeth from the litigation and ordered Ms. Tran To Nga to disclose to the defendants documentary evidence of her but medical pathologies within one month. On December 2, 2015, Ms. Tran To Nga provided defendants with some not all of the documents requested. The next hearing in the case is scheduled for March 2016.

As of December 31, 2015, it is too early in the case to give an accurate assessment of the potential liability.

Turtle Bayou. 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. In June 2010, the Court of Appeals ruled that the District Court had committed errors in the admission of certain documents 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 should reduce OCC’s allocation by as much as 50%. 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, 2015, Maxus has accounted for $0.4 million with respect to this matter to cover liability of El Paso’s future costs at the Turtle Bayou site.

Ruby Mhire. 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 and June and December 2014, Maxus made payments of $3 million each. One last installment payment in the amount of $1 million was made in June 2015. Maxus has no further payment obligation to plaintiffs under the Settlement Agreement; however, it must still undertake remediation of the site, which is expected to be completed in 2016.

The Bedivere Litigation (Bedivere Insurance Company et al. v Maxus Energy Corporation; Texas District Court of Montgomery County, 410th Judicial District; Case No. 1506062679; Date Filed: June 19, 2015) is an Insurance Declaratory Judgment Action (“Declaratory Action”) which was filed against Maxus in Texas State District Court. The Plaintiffs are former insurers, or successors thereof, who issued insurance policies to Maxus and its predecessors covering certain risks associated with oil and gas exploration and production activities in the State of Louisiana (the “Policies”). The underlying subject matter of the Declaratory Action arises from the alleged claims, and ultimate settlement thereof, asserted against Maxus in the Ruby Mhire Litigation. The Ruby Mhire Litigation was a Louisiana Oil Field Legacy Liability Lawsuit which was filed in Cameron Parish, Louisiana in 2008 against numerous oil and gas companies, including Maxus. Maxus settled the Ruby Mhire Litigation during the summer of 2013. Prior to the filing of the Declaratory Action, Maxus had been engaged in substantive discussions with the claims administrator for the Plaintiff insurance companies in the Declaratory Action regarding a possible resolution of Maxus claims under the Policies. On June 18th, 2015, Resolute issued a Denial of Coverage, and without prior notice, filed the Declaratory Action the next day. Maxus is actively defending the case. As a first step, in October 2015, Maxus requested a change of venue to Harris County, which was granted by the court in January 2016.

Environmental Contamination Claims in Louisiana. Maxus is also defending two additional environmental contamination claims brought against it in Louisiana arising from legacy petroleum exploration and production activities.

The Jumonville Litigation is a claim brought in 2012 in Port Coupee Parish, Louisiana against Murphy Oil, as Lessee, and Maxus as successor to Apexco/Natomas, the operator, for environmental contamination caused by the drilling of a deep well in 1976 that was a dry hole, and which was plugged and abandoned in 1978. The claim against Murphy Oil is a contract claim with a 10-year prescription period from date of discovery. The claim against Maxus is a tort claim with a 1-year prescription period from date of discovery. Murphy Oil asserts, without documentary evidence to date, that it probably farmed-out or assigned the lease to Maxus and that there would have been an indemnity provision in such documentation. Murphy Oil’s position is that Maxus has an obligation to indemnify it as Maxus’s predecessor was the operator of the well. However, it has produced not documentary evidence of this. In May 2014, the court severed the plaintiffs’ claims against Maxus and Murphy Oil from its claims against other defendants and set the trial date for August 2015. In July 2015, Maxus and Plaintiffs entered into a non-binding Settlement Memorandum of Understanding (MOU) as a first step towards a court-approved settlement of this litigation. Under the terms of the MOU, the litigation is stayed as to Maxus and Murphy Oil to allow for continued settlement discussions. The MOU contemplates a final settlement consisting of, among other things, two primary components: 1) a monetary payment(s) made by Maxus to the Plaintiffs, and 2) Maxus’ funding and performance of a defined limited site remediation project at the Plaintiffs’ property. As of December 31, 2015, Maxus and the Plaintiffs continue to make progress towards concluding a final and definitive settlement agreement. Maxus expects that this matter will be resolved within the monetary amounts previously budgeted and reserved by the Company. The Company currently forecasts that the Plaintiff’s claims against Maxus in this litigation will be resolved sometime during 2Q 2016. Company Management advices that absent a definitive settlement sharing agreement between Maxus and Murphy, it is possible that litigation of cross-claims could ensue between Maxus and Murphy Oil to resolve any settlement allocation dispute.

The Connors v. Adams Resources is a litigation filed in late October 2013, in the 31st Louisiana Judicial District Court, Jefferson Davis Parish. This is a Louisiana oil field legacy liability lawsuit which was filed by landowners against multiple oil company defendants that operated in the West Lake Arthur Field in Jefferson Davis Parish in Central Louisiana. Plaintiffs allege property damages resulting from environmental soil and groundwater contamination caused by historic oil field drilling and production activities between late 1960s and early 1980s. Plaintiffs seek unspecified compensatory and punitive damages, and environmental remediation. There are 34 defendants including BP, ConocoPhillips, Apache, Chevron, BHP, Honeywell, and Newfield Exploration. Maxus’s potential liability arises from the activities of Maxus’ predecessor Natomas, through its acquisition of Apexco, after it had been spun-off from Apache. Maxus is investigating whether Apache or Natomas is the entity that retained the interest, and therefore the liability, for these wells. The plaintiffs gave Maxus an open-ended extension of time for both pleading and discovery in order to allow Maxus the opportunity to investigate and determine whether Apexco or Apache is legally responsible for the asset (a lease covering three wells) in question. This matter was resolved during the third quarter of 2015, with the Court’s dismissal of Maxus from the litigation with prejudice in October 2015.

Toxic Tort Claims Arising in Illinois, Missouri and Texas

During 2015, seven toxic tort claims were filed against multiple defendants, including Maxus, by the same plaintiff’s law firm, three of which were in Illinois and four in Missouri. The claims generally allege harm (lung cancer and mesothelioma) caused by exposure to asbestos while working as an oil field worker for an independent contractor. All of these cases are in the preliminary stages. Maxus believes that these cases are without merit and is actively defending against them. Moreover, during 2015, Maxus succeeded in obtaining nonsuits and abandonments of all claims against Maxus in three asbestos-exposure cases that had been brought in Texas. In a third Texas case filed in December 2014 and still pending, where plaintiff alleges pulmonary asbestosis, Maxus believes the case is without merit and is actively defending against it.

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; $1.1 million for 2016 and $0.9 million thereafter.

1. SUBSEQUENT EVENTS

As of the date of the issuance of these Consolidated Financial Statements, there are no significant subsequent events that require adjustments or disclosure in the financial statements of the Company as of December 31, 2015, if applicable, which were not already considered in those financial statements in accordance with IFRS.

These consolidated financial statements were approved by Management and authorized to be issued on March 3, 2015.