YPF S.A. — Interim / Quarterly Report 2014

Nov 25, 2014

YPF Holdings, Inc. and Subsidiaries

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

Consolidated Financial Statements as of and
for the nine month period ended September 30, 2014
and Comparative Information
Independent Accountants Review Report

YPF HOLDINGS, INC. AND SUBSIDIARIES

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

TABLE OF CONTENTS

	Page
INDEPENDENT Accountants review REPORT
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2014 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	6-37

Independent Auditors’ Review 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 review

We have reviewed the accompanying interim 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 thousand U.S. dollars and comprise the consolidated balance sheet as of September 30, 2014, and the related consolidated statements of comprehensive income, changes in stockholders’ deficit and cash flows for the nine-month period then ended and a summary of significant accounting policies and other explanatory information included in their Notes 1 to 8.

Amounts and other disclosures as of December 31, 2013, and for the nine-month period ended on September 30, 2013, are included as an integral part of these interim consolidated financial statements and are intended to be read only in relation to those financial statements.

1. Company´s Management Responsibility for the Financial Statements

The Company's Management is responsible for the preparation and fair presentation of the accompanying interim consolidated financial statements of the Company in accordance with International Financial Reporting Standards adopted by the Argentine Federation of Professional Councils in Economic Sciences and incorporated by the Argentine Securities Commission (“CNV”) to its regulations, as they were approved by the International Accounting Standards Board (“IASB”), and therefore is responsible for the preparation and fair presentation of the interim consolidated financial statements attached in accordance with the International Accounting Standard 34, “Interim Financial Reporting”. In addition, Company’s Management is responsible for the internal control as it determines is necessary to enable the preparation of financial statements free from material misstatement.

1. Auditors’ Responsibility

Our responsibility is to issue a conclusion on the accompanying interim consolidated financial statements identified in the first paragraph of section 1 of this report, based on our review. We conducted our review in accordance with International Standards on Review Engagements (“ISRE”), adopted by the Argentine Federation of Professional Councils in Economic Sciences through its Technical Resolution N° 33, as they were approved by the International Auditing Accounting Standard Board (IAASB) of the International Federation of Accountants (“IFAC”). Those standards require that we comply with ethical requirements.

A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

1. Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements of YPF HOLDINGS INC. identified in the first paragraph of the section 1 of this report, are not presented in all material respects, in accordance with International Accounting Standard 34.

1. Emphasis of matter

As discussed in Note 7 to the accompanying interim consolidated financial statements the Company is exposed to certain environmental contingencies. Additionally, as it is described in Note 1 to the accompanying interim consolidated financial statements, as of September 30, 2014 and December 31, 2013, the Company presents shareholders’ deficit and its financial ability to afford its commitments depends on its Parent Company’s financial support or capital contributions.

1. Restriction in use

The accompanying interim consolidated financial statements of the Company as of September 30, 2014, have been prepared for consolidation purposes within 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

November 4, 2014

Deloitte & Co. S.A.

C.P.C.E.C.A.B.A. T° 1 – F° 3

Guillermo D. Cohen

Partner

Public Accountant – University of Buenos Aires

C.P.C.E.C.A.B.A. T° 233 – F° 73

YPF HOLDINGS INC. AND SUBSIDIARIES

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

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2014 AND COMPARATIVE INFORMATION

(In thousands of dollars)

ASSETS		9/30/2014			12/31/2013
NONCURRENT ASSETS:
Intangible assets:
Mineral interests – undeveloped properties (Note 3.a)	$		7,996	$	12,775
Less accumulated amortization – intangible assets			(259)		(1,154)
Intangible assets — net (Note 3.a)			7,737		11,621
Tangible Assets:
Property, plant and equipment (Note 3.b)			332,714		314,427
Less accumulated depreciation, depletion, and amortization			(291,024)		(280,412)
Property, plant, and equipment — net (Note 3.b)			41,690		34,015
Investments and Restricted cash (Note 3.c)			22,211		22,376
Total non-current assets			71,638		68,012
CURRENT ASSETS:
Other receivables and prepayments			8,061		2,582
Accounts receivable			9,213		8,045
Investments and restricted cash (Note 3.c)			6,094		5,673
Cash and cash equivalents			5,141		6,596
Total current assets			28,509		22,896
TOTAL ASSETS	$		100,147	$	90,908

(Continued)

YPF HOLDINGS INC. AND SUBSIDIARIES

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

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2014 AND COMPARATIVE INFORMATION

(In thousands of dollars)

LIABILITIES AND STOCKHOLDER’S DEFICIT			9/30/2014				12/31/2013
STOCKHOLDER’S DEFICIT:
			---		Common stock, $0.01 par value – 810,614 shares issued		and outstanding
Paid-in contributed capital			260,500				170,500
Accumulated other comprehensive income			1,420				1,538
Accumulated deficit			(1,173,054)				( 1,127,186)
Net loss			(17,710)				(45,868)
Total stockholder’s deficit			(118,331)				(190,503)
NONCURRENT LIABILITIES:
Environmental and other long-term liabilities (Note 7)			94,235				152,958
Accrued employee benefit plans			30,487				30,531
Asset retirement obligations			31,494				24,109
Total non-current liabilities			156,216				207,598
CURRENT LIABILITIES:
Environmental and other short-term liabilities (Note 7)			45,451				47,451
Asset retirement obligations			-				9,847
Accrued payroll, employee benefit plans
and related liabilities			4,448				4,886
Other accrued liabilities			4,858				5,589
Notes payable and accrued interest - affiliate Accounts payable			4,509 2,996				- 6,040
Total current liabilities			62,262				73,813
TOTAL LIABILITIES			218,478				281,411
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT	$		100,147			$	90,908
See notes to consolidated financial statements.

(Concluded)

YPF HOLDINGS INC. AND SUBSIDIARIES

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE-MONTH AND THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2014 AND COMPARATIVE INFORMATION

(In thousands of dollars)

													---	---	---	---	---	---	---	---	---	---	---			Nine months ended September 30,					Three months ended September 30,								2014			2013		2014			2013														REVENUES	$	36,577		$	40,122		$ 11,359		$	13,141		COST OF SALES-Production costs		(18,497)			(26,286)		(6,987)			(8,079)		GROSS PROFIT		18,080			13,836		4,372			5,062																										OPERATING EXPENSES:												Administrative and environmental expenses (Note 3.d)		(30,624)			(47,376)		(18,360)			(24,212)		Exploration, relinquishment and retirement of PP&E		(4,216)			(4,215)		(245)			(276)		OPERATING LOSS		(16,760)			(37,755)		(14,233)			(19,426)																										FINANCE EXPENSES												Gain on assets		67			11		(378)			8		Losses on liabilities		(1,017)			(842)		(364)			(561)		LOSS BEFORE INCOME TAXES		(17,710)			(38,586)		(14,975)			(19,979)																										INCOME TAX EXPENSE		-			-		-			-		NET LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS												$	(17,710)		$	(38,586)		(14,975)		$	(19,979)																										OTHER COMPREHENSIVE INCOME (LOSS)
		2014			2013
	$	12,358		$	14,137
		(9,513)			(9,314)
		2,845			4,823
		(3,352)			(11,864)

YPF HOLDINGS INC. AND SUBSIDIARIES

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

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S DEFICIT

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2014 AND COMPARATIVE INFORMATION

(In thousands of dollars)

	2013
								Other					Total
	Subscribed		Capital					Comprehensive			Accumulated		Stockholders’
	Capital		contributions		Total			Income			Deficit		Deficit
Balance as of January 1, 2013	810,513		132,500		943,013			94			(1,128,093)		(184,986)
Capital contribution from Parent	-		34,000		34,000			-			-		34,000
Net loss for the period	-		-		-			-			(38,586)		(38,586)
Other comprehensive income for the period:
- Available-for-sale securities	-		-		-			873			-		873
Balance as of September 30, 2013	810,513		166,500		977,013			967			(1,166,679)		(188,699)
	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	-		90,000		90,000				-		-		90,000
Net loss for the period	-		-		-				-		(17,710)		(17,710)
Other comprehensive income for the period:
- Available-for-sale securities	-		-		-				(118)		-		(118)
Balance as of September 30, 2014	810,513		260,500		1,071,013				1,420		(1,190,764)		(118,331)

See notes to consolidated financial statements.

YPF HOLDINGS INC. AND SUBSIDIARIES

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2014 AND COMPARATIVE INFORMATION

(In thousands of dollars)

		2014		2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(17,710)	$		(38,586)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, depletion, and amortization ARO accretion Net relinquishment and retirement of PP&E		11,709 968 3,517			21,273 - -
Changes in assets and liabilities
Accounts receivable		(1,168)			491
Other receivables and prepayments		(5,479)			176
Accounts payable and other accrued liabilities		(3,775)			(11,211)
Accrued payroll, employee benefit plans and related liabilities		(482)			(1,472)
Environmental and other non-current liabilities		(60,723)			13,739
Asset Retirement Obligation		(17,486)			-
Interest and others		(64)			784
Net cash used in operating activities		(90,693)			(14,806)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant, and equipment		(4,962)			(790)
Decrease in investments and restricted cash		(300)			(18,156)
Net cash used in investing activities		(5,262)			(18,946)
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution from Parent Company		90,000			34,000
Loans received		4,500			-
Net cash provided by financing activities		94,500			34,000
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,455)			248
CASH AND CASH EQUIVALENTS — Beginning of year		6,596			8,952
CASH AND CASH EQUIVALENTS — End of period	$	5,141	$		9,200

See notes to consolidated financial statements.

YPF HOLDINGS, INC. AND SUBSIDIARIES

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2014 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 September 30, 2014 and December 31, 2013, the Company presents stockholders’ deficit and its financial ability to afford its commitments depends on its Parent Company’s financial support or capital contributions.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Application of International Financial Reporting Standards

The consolidated financial statements of the Company for the nine-month period ended September 30, 2014, have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The adoption of IFRS, as issued by the International Accounting Standards Board (“IASB”) was determined by the Technical Resolution No. 26 (ordered text) issued by Argentine Federation of Professional Councils in Economic Sciences (“FACPCE”) and the Regulations of the Argentine Securities Commission (“CNV”).

The consolidated financial statements of the Company as of September 30, 2014, have been prepared for consolidation purposes with YPF’s consolidated financial statements and for its presentation to the CNV in Argentina and may not be appropriate for other purposes. Amounts included in these financial statements are expressed in thousands of dollars (“$”), except where otherwise indicated.

Significant Accounting Policies

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

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

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

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

Available-for-sale securities — As of September 30, 2014, the Company had $3.8 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 September 30, 2014, have been capitalized, pending determination as to whether the wells have found proved reserves, which justify commercial development.

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

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

The Company’s Neptune Field Development achieved first production on July 6, 2008.  Production continues with 6 subsea producing wells tied back to a central floating production facility located in Green Canyon 613. The production reached the platform capacity of 50,000 barrels of oil per day (“bopd”) on July 24, 2008.  As of September 30, 2014, the platform was producing an average of 8,443 bopd.  Approximately $261.4 million investments have been capitalized by the Company for the Neptune project as of September 30, 2014.  In July 2014 the Neptune consortium started the drilling of infill well SB-003, which will develop reserves from the M9C and M10 reservoirs. In September 2014, the Neptune consortium approved the $12.71 million AFE for the completion.

The Neptune consortium has recently completed carrying out the required work of plugging and abandoning Neptune exploratory wells #3, #4, SD01 and SD02.

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:

	For the nine month period ended on September 30,				For the year ended on December 31, 2013
	2014		2013
Asset retirement obligations – beginning of year	33,956		10,083		10,083
Asset retirement obligations – increase	14,056		22,388		23,054
Accretion expense	968	842		857
Obligations paid	(17,486)	-		(38)
Asset retirement obligations – end of period	31,494		33,313		33,956

The asset retirement obligation was increased in the second quarter of 2014 and the third quarter of 2013 to reflect the additional cost required and the change in the scheduled abandonment date, based on an internal reserve analysis and abandonment cost estimation from the operator of the joint venture.

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

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

In the second quarter of 2014 and 2013, the Company relinquished certain interest rights in twelve leasehold blocks and seventeen leasehold blocks, respectively. These leaseholds were 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 $3.2 million as of September 30, 2014 and $1.7 million as of September 30, 2013 respectively disclosed as exploration and relinquishment and retirement of PP&E in the statement of comprehensive income.

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 September 30, 2014, the Company had $2.3 million deposited in trust funds and $ 21.3 million as security deposits for letters of credit (see additionally Note 7 - Hudson County, New Jersey).

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

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

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

1. New Accounting Pronouncements

The standards, interpretations and related amendments published by the IASB and endorsed by the FACPCE and the CNV that have been applied by the Company as from the year beginning on January 1, 2014, are the following:

IFRIC 21 “Levies”

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

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

IAS 36 “Impairment of assets”

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

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

The adoption of the standards and interpretations or amendments mentioned in the previous paragraphs did not have a significant impact on the financial statements.

In addition to IFRS 9, “Financial Instruments”, IFRS 10, “Consolidated Financial Statements”, IFRS 11, “Joint Arrangements”, and IFRS 12, “Disclosure of Interests in Other Entities”, as well as the amendments to IAS 27, “Separate Financial Statements” and IAS 28, “Investments in Associates and Joint Ventures”, which have been early applied as of the date of transition, the Company has not applied in advance any other standard or interpretation permitted by the IASB.

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 September 30, 2014 and that are not applied in advance to the effective date by the Company are the following:

IAS 39 “Financial instruments: Recognition and measurement”

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

IAS 19 “Employee Benefits”

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

Annual improvements cycle to IFRS

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

IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”

In May 2014, IASB issued a caution to IAS 16 and IAS 38 clarifying the depreciation and amortization’s accepted methods.

IFRS 14 “Joint Arrangements”

In May 2014 the IASB issued an amendment to IFRS 14 to establish that acquisitions of participation in joint operations whose activities constitute a business as defined by IFRS 3; apply the accounting principles set out in this standard. It is applicable for annual periods beginning on or after 2016, allowing early application.

IFRS 15 “Revenue from Contracts with Customers”

In May 2014 the IASB issued IFRS 15 which abrogates the application of IAS 11, 18 and IFRIC 13, 15, 18 and SIC 31. Applicable for annual periods beginning on or after 2017, allowing early application.

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

IAS 27 Separate Financial Statements

In August 2014 the IASB issued an amendment to IAS 27. This amendment allows entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements.

1. ANALYSIS OF THE MAIN ACCOUNTS OF THE FINANCIAL STATEMENTS

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

Balance Sheets as of September 30, 2014 and December 31, 2013

1. NON-CURRENT – INTANGIBLE ASSETS

		2014
		Cost
Main Account		Beginning Balance		Increases		Disposals		Ending Balance
Undeveloped Properties		12,775		-		(4,779)		7,996
Total 2014		12,775		-		(4,779)		7,996
Total 2013		15,907		-		(3,132)		12,775

		2014										2013
		Depreciación
Main Account		Beginning Balance		Net Transfers and Decreases		Increases		Ending Balance		Net booked value		Net booked value 09/30/2013		Net booked value 12/31/2013
Undeveloped Properties		(1,154)		1,536		(641)		(259)		7,737		11,840		11,621
Total 2014		(1,154)		1,536		(641)		(259)		7,737
Total 2013		(1,209)		1,405		(1,350)		(1,154)				11,840		11,621

1. NON-CURRENT – PROPERTY, PLANT AND EQUIPMENT

		2014
		Cost
Main Account		Beginning Balance		Increases		Disposals		Ending Balance
Neptune non current inventory		4,040		8		(237)		3,811
Land and buildings		2,198		-		-		2,198
Asset Retirement Obligation		31,078		14,055		-		45,133
Producing Leases		256,756		-		(38)		256,718
Drilling and work in progress		88		4,550		-		4,638
Other property		20,267		404		(455)		20,216
Total 2014		314,427		19,017		(730)		332,714
Total 2013		288,677		26,175		(425)		314,427

		2014										2013
		Depreciación
Main Account		Beginning Balance		Net Transfers and Decreases		Increases		Ending Balance		Net booked value		Net booked value 09/30/2013		Net booked value 12/31/2013
Neptune non current inventory		-		-		-		-		3,811		4,062		4,040
Land and buildings		-		-		-		-		2,198		2,198		2,198
Asset Retirement Obligation		(14,553)		-		(7,494)		(22,047)		23,086		19,430		16,525
Producing Leases		(246,843)		-		(3,280)		(250,123)		6,595		12,754		9,912
Drilling and work in progress		-		-		-		-		4,638		47		89
Other property	(19,016)		456		(294)		(18,854)		1,362		319		1,251
Total 2014		(280,412)		456		(11,068)		(291,024)		41,690
Total 2013		(255,607)		-		(24,805)		(280,412)				34,015		23,403

1. FINANCIAL ASSETS - INVESTMENTS AND RESTRICTED CASH

	9/30/2014				12/31/2013
	Non-current		Current		Non-current		Current
Investments	917		3,816		984		3,860
Trust Funds – restricted cash	21,294		2,278		21,392		1,813
	22,211		6,094		22,376		5,673

Statements of Comprehensive Income for the nine and three-month periods ended September 30, 2014 and comparative information

1. ADMINISTRATIVE AND ENVIRONMENTAL EXPENSES

	Nine months ended September 30,				Three months ended September 30,
	2014		2013		2014		2013
Environmental expense	19,000		24,704		13,548		19,756
Pension expense	971		697		338		232
Legal Expense	2,272		13,565		2,004		1,175
All other administrative expenses	8,381		8,410		2,470		3,049
	30,624		47,376		18,360		24,212

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 September 30, 2014 and December 31, 2013 the Company had $3.8 million and $2.6 million, respectively, of accounts receivable from affiliated parties: YPF S.A and YPF Services USA Corp.

As of September 30, 2014 the Company had a $4.5 million note payable including accrued interest with YPF Chile. This loan is expected to be paid in full during the fourth quarter of 2014. As of December 31, 2013 the Company had no accounts payable or loans to 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 September 30, 2014, current liabilities of $0.4 million and noncurrent liabilities of $2.6 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 September 30, 2014, current liabilities of $2,8 million and noncurrent liabilities of $18.7 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 September 30, 2014, and comparative information is as follows:

Defined – benefit obligations	9/30/2014	12/31/2013
Net present value of obligations	32,913		32,999

Changes in the fair value of the defined-benefit obligations	9/30/2014		9/30/2013
Liabilities at the beginning of the year	32,999		32,331
Service cost	-		-
Interest cost	941		697
Actuarial (gains)/losses	-		-
Benefits paid and settlements	(1,027)		(1,736)
Liabilities at the end of the year	32,913		31,292
Changes in the fair value of the plan assets	9/30/2014		9/30/2013
Fair value of assets at the beginning of the year	-		-
Expected return on assets	-		-
Actuarial (gains)/losses	-		-
Employer and employees contributions	1,027		1,736
Benefits paid and settlements	(1,027)		(1,736)
Fair value of assets at the end of the year	-		-

	Expenses
Amounts recognized in the Statement of Income	9/30/2014		9/30/2013
Service cost	-		-
Interest cost	941		697
Amendments	-		-
Total pension costs recognized Administrative Expenses	941		697

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

Actuarial assumptions	2014		2013
Discount rate	3.25 – 3.9%		2.5 – 3.0%
Expected return on assets	N/A		N/A
Expected increase in salaries	N/A		N/A

The Black Lung Benefits Act provides monetary and medical benefits to miners disabled with black lung disease, and also provides benefits to the dependents of deceased miners if black lung disease caused or contributed to the miner’s death. As a result of the former operations of its coal-mining subsidiaries, the Company is required to provide insurance of this benefit to former employees and their dependents. The Company maintains a reserve to cover its estimate of these obligations 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 $173.1 million and $180.1 million as of September 30, 2014  and December 31, 2013, respectively, because they do not meet the criteria for recognition under IFRS.  The deferred tax assets correspond mainly to (a) temporary deductible differences of $118.7 million and $137.6 million as of September 30, 2014 and December 31, 2013, respectively; and (b) federal net operating loss carryforwards credits of $54.4 million and $42.5 million, as of September 30, 2014 and December 31, 2013, 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 September 30, 2014 and December 31, 2013 are as follows:

	9/30/2014		12/31/2013
Current:
Environmental liabilities	$41,271	$41,271
Legal liabilities	4,180		6,180
Total Environmental and other short term liabilities	$45,451		$47,451

Noncurrent:
Environmental liabilities		92,490		84,736
Legal liability		1,745		68,222
Total Environmental and other long term liabilities		94,235		152,958
Total Commitments and liabilities		$139,686		$200,409

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”), Maxus agreed in 1986 to indemnify Chemicals and Occidental from and against certain liabilities relating to the business or activities of Chemicals prior to the September 4, 1986, closing date (the “Closing Date”), including certain environmental liabilities relating to certain chemical plants and waste disposal sites used by Chemicals prior to the Closing Date.

As of September 30, 2014, the environmental liabilities discussed herein totaled approximately $133.8 million. Management believes it has adequately accounted for all environmental liabilities that are probable and can be reasonably estimated as of such time; however, changes in circumstances could result in changes, including additions, to such liabilities in the future.

Environmental Liabilities (in millions of dollars)
Project	9/30/2014			12/31/2013
Newark	$15.0			$14.7
Passaic River	52.3			58.8
Hudson County (Kearny)	33.9			17.3
Painesville RIFS	16.7			17.8
Greens Bayou	3.0			3.6
Tuscaloosa	5.5			5.8
Other Sites	7.4			8.0
	$133.8			$126.0

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

Newark, New Jersey - A consent decree, previously agreed upon by the U.S. Environmental Protection Agency (EPA), the New Jersey Department of Environmental Protection and Energy (DEP), and Occidental, as successor to Chemicals, was entered in 1990 by the U.S. District Court of New Jersey for Chemicals’ former Newark, New Jersey agricultural chemicals plant. The interim remedy has been completed and paid for by Tierra pursuant to the above-described indemnification obligation to Occidental. This project is in the operation and maintenance phase. Operating and maintaining such remedy is expected to cost approximately $1 million per year, and as of September 30, 2014, the Company has accounted for approximately $15 million in connection with such activities.

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

The EPA’s findings of fact in the 2007 AOC (which amended the 1994 AOC) 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. Tierra estimates that the total cost to implement the CSO AOC is approximately $5 million and will take approximately two years to complete.

In 2003, the DEP issued a directive (“Directive No. 1”) to Occidental and Maxus and certain of their respective related entities as well as other third parties. Directive No. 1 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. In addition, in August 2010, Tierra proposed to the other parties that for the third stage of the RI/FS undertaken in Newark Bay, the costs be allocated on a per capita basis. As of September 30, 2014, the parties have not agreed to Tierra´s proposal to share costs on a per capita basis. However, the Company lacks sufficient information to determine additional costs, if any, it might have with respect to this matter once the final scope of the phase III is approved, as well as the proposed distribution previously mentioned.

In December 2005, the DEP issued a directive to Tierra, Maxus and Occidental directing said parties to pay the state of New Jersey’s costs of developing a Source Control Dredge Plan focused on allegedly dioxin-contaminated sediment in the lower six-mile portion of the Passaic River. The development of this plan was estimated by the DEP to cost approximately $2.3 million. The DEP advised the recipients that (1) it engaged in discussions with the EPA regarding the subject matter of the directive, and (2) the recipients were not required to respond to the directive until otherwise notified.

In June 2007, the EPA released a draft Focused Feasibility Study (“FFS”). The draft FFS outlined several alternatives for remedial action in the lower eight miles of the Passaic River. These ranged from no action (which would result in comparatively little cost) to extensive dredging and capping in the lower eight miles of the river (which, according to the draft FFS, the EPA estimated could cost from $0.9 billion to $2.3 billion). Tierra, in conjunction with the other parties working under the 2007 AOC, submitted extensive comments on the draft FFS to the EPA, as did a number of other interested parties. As a result of the comments received, EPA withdrew the FFS for revision and further consideration of the comments.

In January 2013, EPA indicated that the FFS would be made public in June or July 2013, assuming there were no significant issues identified by the National Remedy Review Board “NRRB”), or in September 2013, if the NRRB raised significant issues that need to be addressed. During the first quarter of 2013, Tierra received information indicating that the EPA still had unresolved issues regarding modeling and, consequently, the FFS would not be made public in December 2013. At that time, EPA unofficially informed Tierra that the FFS would be issued by the end of January 2014 or the beginning of February 2014. In November 2013, at a Community Advisory Group (“CAG”) meeting, the EPA described the alternatives it was considering in the revised 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: U.S. $1.4 billion to U.S. $3.5 billion, depending on whether the dredged sediment is disposed of in a confined aquatic disposal facility on the floor of Newark Bay (“CAD”) or at an off-site disposal facility or local decontamination and beneficial use ); (iii) capping with dredging of 4,3 million cubic yards over 6 years (EPA estimated cost: $1 billion to $1.8 billion, depending on whether there is a CAD or off-site disposal or local decontamination and beneficial use), (iv) focused dredging and capping of 0.9 million cubic yards over 3 years (EPA estimated cost: U.S. $0.4 billion to U.S.$0.6 billion, depending on whether there is a CAD or off-site disposal or local decontamination and beneficial use). During the first quarter of 2014, Maxus representatives met several times with EPA, both at Region 2 offices in New York City as well as at EPA headquarters in Washington DC, expressing concerns about the FFS process and asking EPA to withhold publication of the FFS and to permit the RI/FS process for the entire 17 miles of the Passaic River to proceed without interference from the FFS. The CPG—Cooperating Parties Group also held similar meetings.

The FFS was finally 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 is anticipated that the Record of Decision would be issued twelve to eighteen months after the FFS was made public. The FFS contains the EPA’s proposed four remedial alternatives as well as EPA’s cost estimates for each alternative. EPA’s preferred alternative is the third one, 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. The dredged materials are to be dewatered and transported by rail to off-site incinerators and landfills depending on their characteristics. EPA will require long-term monitoring and maintenance of the cap to ensure its stability and integrity. EPA specifically seeks comment on dredged materials management options (off-site disposal versus a Confined Aquatic Disposal facility (CAD)) and navigational depths (whether shallower depths would accommodate reasonably-anticipated future use in the lower 2.2 miles of the lower Passaic River). The FFS contains the following cost estimates:

Alternative	Disposal Scenario	Total Present-Value Cost
1. No Action	Not applicable	$0
1. Deep Dredging with Backfill	With CAD With Off-Site With Decontamination	$1.34 Billion $3.24 Billion $2.62 Billion
1. Capping with Dredging for Flooding and Navigation	With CAD With Off-Site With Decontamination	$953 Million $1.73 Billion $1.58 Billion
1. Focused Capping with Dredging for Flooding	With CAD With Off-Site With Decontamination	$365 Million $614 Million $606 Million

In connection with the FFS, EPA held three public meetings in 2014, including on May 7th, May 21st, and June 23rd. In addition, EPA held a workshop on Confined Aquatic Disposal on July 22, 2014.

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 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 plans' 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.

Parallel to their review of the 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 FFS. Maxus and Tierra submitted to EPA a Statement of Work for Project In-ECO on May 15, 2014 and met with EPA on May 15th and May 29th. EPA provided comments on the In-ECO Statement of Work in September. A revised In-ECO Statement of Work will be submitted to EPA in November 2014.

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

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

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

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

In June 2008, the EPA, Occidental and Tierra entered into an AOC (“Removal AOC”) pursuant to which Tierra (on behalf of Occidental) would undertake a removal action of sediment from the Passaic River in the vicinity of the former Diamond Alkali facility. This action would result in the removal of approximately 200,000 cubic yards (153,000 cubic meters) of sediment, to be carried out in two different phases. The first phase, which commenced in July 2011, encompassed the removal of 40.000 cubic yards (30.600 cubic meters) of sediments and was completed at the end of 2012. The EPA inspection was held in January 2013. Tierra received written confirmation of completion in March 2013. The second phase 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 Removal AOC provides that the initial form of financial assurance is to be provided through a trust fund. The total amount of required financial assurance may be increased or decreased over time if the anticipated cost of completing the removal work contemplated by the Removal AOC changes. Tierra may request modification of the form and timing of financial assurance for the Removal AOC. During the first half of 2011, the Company signed a Removal Design Services and Construction Contract with the contractor responsible for the removal action, in which the costs originally estimated for the first phase of the Removal AOC were re-estimated. Construction of both the sheet pile enclosure in the river and the sediment dewatering and water treatment operation at the upland processing facility were completed in the first quarter of 2012; dredging and de-watering activities were completed in the second quarter of 2012. Backfilling of non-contaminated sediment was completed in the third quarter of 2012. Removal of all equipment occurred in the fourth quarter of 2012. The removal work will remove a number of contaminants of concern, which may have come from sources other than or in addition to the former Diamond Alkali plant. The Company may seek cost recovery from the parties responsible for such contamination. However, as of September 30, 2014, it is not possible to make any predictions regarding the likelihood of success or the funds potentially recoverable in a cost-recovery action. The 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, EPA requested that Tierra submit a work plan to conduct additional sampling of the phase two area “on a more refined grid … [to] define the area of contamination more clearly.”

In relation to the supposed contamination related to dioxin and other “hazardous substances” discharged from Chemicals’ former Newark plant and the contamination of the lower stretch of the Passaic River, Newark Bay, other nearby waterways and surrounding areas, in December 2005, the DEP sued YPF Holdings Inc., Tierra, Maxus and several other companies, in addition to Occidental, in the Superior Court for Essex County, New Jersey, alleging contamination supposedly related to dioxin and other “hazardous substances” discharged from Chemicals’ former Newark plant and the contamination of the lower portion of the Passaic River, Newark Bay, other nearby waterways and surrounding areas. The DEP 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.

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

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

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

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

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

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

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

The Court issued the Track VIII order on September 11, 2012. The Track VIII Order 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. Accordingly, the Court entered a 90-day stay for the State to complete negotiations with the third party defendants who signed the MOU, subject to later approval of those settlements from the Court. This stay was extended indefinitely pending further action by the court. The State and the third party defendants reported to the Court that they were continuing to make progress toward a settlement.

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

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

As of September 30, 2014, DEP had not filed with the Court dollar amounts on all its claims, but it had (a) contended that a $50 million cap on damages under one of the New Jersey statutes should not be applicable, (b) alleged that it had incurred approximately $118 million in past “cleanup and removal costs” (plus legal costs to 2009), (c) sought an additional award between $10 and $20 million to fund a study to assess natural resource damages, (d) notified Maxus and Tierra’s legal defense team that DEP is preparing financial models of costs and of other economic impacts and, (e) sought reimbursement for external legal fees paid.

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

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

On December 12, 2013 the Judge approved the Settlement Agreement together with the settlement agreement executed between the State of New Jersey and the third parties defendants. On January 24, 2014 Occidental filed a notice of appeal from the court's approval of the Settlement Agreement, stating that it was not objecting to the partial settlement of Track VIII (quantum of damages caused by Chemicals’ Newark plant) but to the delay in the commencement of Track IV (Occidental’s claims under the doctrines of alter ego and fraudulent conveyance against Repsol and YPF). On February 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. On February 3, 2014, the court of appeals informed the parties that it questioned whether or not Judge Lombardi’s decision on December 12th regarding the timing of Track IV was final or interlocutory. Plaintiffs responded to the appeal with a motion seeking expedited resolution. Occidental filed a cross-motion seeking to have CMO XX (which was certified as final by trial court) deemed interlocutory such that the appeal would be dismissed with a preservation of Occidental’s right to appeal it later after all remaining issues in the case were adjudicated. The State of New Jersey argued to the court that Judge Lombardi’s decision was a final order. By Orders dated March 26, 2014 (as amended by supplemental Orders on March 27, 2014) the court of appeals denied Occidental’s motion, determined it would hear the appeal, and then granted Plaintiffs’ motion for expedited resolution. As a result, 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, and the State was able to collect the settlement funds in escrow from the direct defendant settlement as well as from the State’s settlement with the former Third-Party Defendants ($165 million total).

Under prior Case Management Orders the State was required to file its Fifth Amended Complaint by February 12, 2014. The State and Occidental agreed to an extension until resolution of Occidental's appeal. After the Appellate Division dismissed Occidental’s appeal and ruled in favor of the Plaintiffs, Occidental and Plaintiffs agreed to ask that the trial court to stay Track VIII proceedings to allow for renewed and expedited settlement discussions.

On July 22, 2014, the Court issued both (a) Case Management Order XXIII governing the procedural schedule for Track IV 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.

Regarding the former (Track IV), the Court set forth the following deadlines: July 31, 2014—Occidental to file amended cross claims but no new causes of action; September 1, 2014—Defendants to file their answers; September 19, 2014—Parties to file motions to dismiss after seeking leave to do so from the Special Master; October 17, 2014: Responsive briefs due; October 31, 2014—Reply briefs due.

During the third quarter of 2014, two significant events took place. First, OCC and the State of New Jersey executed a Track VIII settlement agreement (consent judgment) on August 20, 2014. The Consent Judgment was published in the September 15, 2014 New Jersey Register. The 30-day public comment period closed on October 15, 2014. In the absence of comments that cause the State to reject the settlement, the State and OCC will move on November 10, 2014 for an order from Judge Lombardi approving the settlement. Any opposition to the settlement will be filed by December 1, 2014, and the settlement motion will be heard by Judge Lombardi on December 16, 2014. Second, OCC filed its Third Amended Cross-Claims on July 31, 2014. The other defendants moved, with the Court’s permission, to strike OCC’s Third Amended Cross- Claims on the ground that Judge Lombardi’s scheduling pled in the cross claims that it had previously order does not permit OCC to allege facts not filed, and OCC has done so in violation of that order. On October 28, 2014, Judge Lombardi granted the motion to strike OCC’s Third Amended Cross-Claims and stated that for now he would proceed on the prior pleadings. This means that OCC will not be allowed to add new cross claims against the defendants at this time; however, the Judge did indicate that OCC could request permission to add new cross claims at trial if evidence is uncovered during the course of discovery. In the meantime, the deadline to file motions to dismiss (September 19, 2014) was adjourned without date.

Regarding the latter (Track VIII), the Court issued an order by which it sets forth a schedule for the treatment of the Settlement between the State of New Jersey and Occidental. The schedule, which is expected to be completed on December 16, 2014 includes: public presentation, plaintiffs’ approval, publication, public comment period, and judge´s approval. Consistent with prior case management orders, Track IV discovery remains stayed until further order of the Court. OCC is seeking to re-commence Track IV discovery prior to the Court’s decision either approving or rejecting the Consent Judgment. The other defendants contend that discovery should await approval or rejection of the Consent Judgment, on the ground that if rejected Track VIII will need to proceed and the schedule for both tracks will need to be revisited. The Special Master has convened a meeting for November 4, 2014 to address the question of when Track IV discovery is to recommence. Management considers the trial will begin at the end of 2015 or early in 2016. OCC has also advised that it intends to make a motion for summary judgment against Maxus seeking a ruling that Maxus is liable for the full amount of OCC’s settlement with the State without the need for any allocation of any portion of the settlement to OCC’s own conduct. Maxus vigorously disputes this interpretation of the September 1986 Stock Purchase Agreement and rejects the position of OCC regarding the obligation to pay for any or all the amount of OCC’s settlement with the State. OCC’s initial request to file this motion was denied by the Special Master and the Court. However, OCC may re-apply for permission to file the motion.

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

As of September 30, 2014, there is a total of approximately $52.3 million of environmental liability comprising the estimated costs for studies, the Company’s best estimate of the cash flows it could incur in connection with remediation activities considering the studies performed by Tierra, the estimated costs related to the Removal AOC agreement, and in addition certain other matters related to Passaic River and the Newark Bay, also including certain related legal matters. However, it is possible that other works, including interim remedial measures different from those considered may be ordered. In addition, the development of new information, the imposition of penalties, or remedial actions or the result of negotiations related to the matters referred to above, differing from the scenarios that the Company has evaluated, could result in additional costs to the amount currently accrued.

Passaic River Mile 10.9 Removal Action – In February 2012, the EPA issued to the CPG a draft Administrative Settlement Agreement and order on Consent (“AOC RM 10.9”) for Removal Action to address high levels of contamination of TCDD dioxin, PCBs, mercury and other contaminants of concern in the vicinity of the Passaic River’s mile 10.9, comprised of a sediment formation (“mud flat”) of approximately 8.9 acres. In connection with this AOC RM 10.9, the EPA informed the CPG that approximately 16,000 cubic yards of sediments should be removed and that pilot scale studies be conducted to evaluate ex situ decontamination beneficial reuse technologies, innovative capping technologies, and in situ stabilization technologies for consideration and potential selection as components of the remedial action to be evaluated in the 2007 AOC and the FFS and selected in one or more subsequent records of decision. On June 18, 2012, the EPA announced that it had signed the AOC RM 10.9 with 70 parties. OCC, Maxus and Tierra declined to sign such AOC since they could not come to an agreement with the other parties in the CPG on how to allocate the estimated cost of the removal action. On June 25, 2012, the EPA issued to OCC an order, under section 106 of CERCLA, to participate and cooperate with the members of the CPG that have signed the AOC RM 10.9 (the “106 Order’). On June 26, 2012, the EPA proposed to Maxus and Tierra that OCC could meet its obligation to submit a good faith offer by maintaining and making available to the CPG for one year the dewatering facility currently in place for phase one of the river mile 3.2 removal action pursuant to the Removal AOC. After assessing the costs and benefits of complying or not complying with the 106 Order, Maxus and Tierra, with OCC concurrence, decided to respond to the 106 Order in the affirmative. Consequently, on July 23, Maxus/Tierra notified EPA and the CPG of OCC’s intent to comply with the order by maintaining and making available to the CPG the dewatering facility then in place for the Maxus/Tierra removal action at river mile 3.2, and on July 27, Maxus/Tierra transmitted to CPG, with a copy to the EPA, OCC’s good faith offer consisting of the extension of the ground lease and the maintenance of the dewatering equipment. On August 10, the CPG rejected OCC’s good faith offer, and, in response to the EPA’s request for the basis for such rejection, on September 7 the CPG stated they had alternative plans for handling sediment to be excavated at RM 10.9 and, therefore, did not have any use for the existing dewatering facility. EPA, by letter of September 26, 2012, advised that it would be necessary for EPA and Occidental to discuss other options for Occidental to participate and cooperate in the RM 10.9 removal action, as required by its Unilateral Administrative Order. On September 18, 2012, the EPA advised the Passaic River Community Advisory Group (CAG) that the bench scale studies of the treatment technologies did not sufficiently lower concentrations of the chemicals to justify the cost, so the RM 10.9 sediments will be removed offsite for disposal. EPA notified OCC, Maxus and Tierra that it 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 will take place in the 4th quarter of 2014. EPA extended the deadline for delivering financial assurance to March 14, 2014 and later further extended the deadline indefinitely. As of September 30, 2014, the Company has reserved $4.1 for this matter

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

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. Subsequently, in May 2005, the DEP took two actions in connection with the chrome sites in Hudson and Essex counties. First, the DEP issued a directive to Maxus, Occidental and two other chromium manufactures (the “Respondents”), directing them to pay the DEP a total of $19.5 million to conduct a study and arrange for the cleanup of chromite ore residue at the three sites in Jersey City. While the Company believed that Maxus was improperly named and there was little or no evidence that Chemical’s chromite ore residue was sent to any of these sites, the DEP claimed the Respondents were jointly and severally liable without regard to fault. Second, the DEP filed a lawsuit against Occidental and two other entities in state court in Hudson County, seeking among other things, (a) cleanup of various sites where chromite ore processing residue 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. 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. The master schedule contemplates that the remediation will proceed at sites in discrete groupings. There are 26 sites that have not yet received a No Further Action (“NFA”) determination. During the year 2013, Tierra began 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 six sites. DEP expressed an intention to reject the conceptually proposed work plan as to one of the six sites; therefore, Tierra requested and received DEP approval to revise the master Schedule to replace that site with another that DEP wanted to expedite because of ongoing redevelopment. In addition, Tierra has been coordinating activities at certain of these sites with the planned Portal Bridge construction adjacent to those sites, but the Portal Bridge work has been on hold.

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

In addition:

In November 2005, several environmental groups sent a notice of intent to sue the owner of the property adjacent (the “Adjacent Property” or Standard Chlorine Chemical Site) to the former Kearny Plant and five other parties, including Tierra, under the Resource Conservation and Recovery Act. The stated purpose of the lawsuit, if filed, would be to require the noticed parties to carry out measures to abate alleged endangerments to health and the environment emanating from the Adjacent Property. The parties 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.

In March 2008, the DEP approved an Interim Response Action plan for work to be performed at the Kearny Plant site by Tierra and at the Standard Chlorine Chemical Site by Tierra in conjunction with two other parties (these parties and Tierra collectively formed the “Peninsula Restoration Group” or “PRG”). The Interim Response Action covering both the Kearny Plant site and the Standard Chlorine Chemical Site was approved by the DEP in June 2010. Separately, this Adjacent Property was listed by EPA on the National Priority List in 2007. In July 2010, EPA notified Tierra (on behalf of OCC) along with three other parties that they are potentially responsible for the Standard Chlorine Chemical Site. The EPA requested a good faith offer to conduct a Remedial Investigation/ Feasibility Study (“RI/FS”) for this site. Tierra (on behalf of OCC), one of the other PRG members and a newly identified potentially responsible party - Cooper Industries (or “Cooper”) submitted a good faith estimate offer to negotiate and Administrative Order on Consent (“AOC”) to perform the RI/FS. The third member of the PRG made an inability-to-pay submission to EPA and is no longer active in the PRG. In the fourth quarter 2011, the PRG reached an agreement in principle with Cooper, whereby Cooper would join the PRG. In addition, in February 2013 EPA issued a notice of liability to yet another potentially responsible party with whom the PRG entered into discussions in an effort to convince the party to join the group. Effective May 3, 2013, Occidental (represented by Tierra) and three other potentially responsible parties signed with the EPA an AOC to conduct an RI/FFS. The Remedial Investigation Work Plan for the site was submitted to the EPA on April 8, 2013 in advance of the execution of the AOC as part of the PRG’s show of good faith. EPA approval of the Work Plan was received in September 2013 and work under the RI/FFS AOC began in the fourth quarter 2013. The Group also responded to an EPA request to draft a Community Involvement Plan (CIP) which EPA approved in the second quarter. Upon receipt of validated sampling results from the RI/FFS, the Group’s consultant has prepared a draft Candidate Technologies Memo (CTM) and Draft Pathway Analysis Report (PAR) as a precursor to preparing the FFS. The aim of the FFS is to rely on the prior IRA work, supplemented with additional remedial components needed to conclude remediation of the Site. The CTM and PAR were submitted to EPA in the second quarter of 2014 and subsequently approved. The Group separately submitted a Screening Level Ecological Risk Assessment (SLERA) in May 2014, which was approved by EPA in September 2014. In addition, the Group submitted on July 24, 2014 a Work Plan for Supplemental Investigation in the localized area outside the barrier wall, which was approved on July 25, 2014 (work is scheduled to begin in October 2014). The Group submitted on September 2, 2014 a Baseline Ecological Risk Assessment (BERA), which is currently under EPA review. The Group is preparing a Cultural Resources Investigation Report to be ready for submission in December 2014.

Financial assurance in the form of a trust fund in the amount of $750,000 has been posted on behalf of the AOC respondents and will be utilized to fund the cost of the work going forward. At present, such amount is expected to fund the entire RI/FFS obligation. Pursuant to a request of the DEP, in the second half of 2006, the PRG tested the sediments in a portion of the Hackensack River near the former Kearny Plant. A report of those test results was submitted to the DEP. DEP requested additional sampling, and the PRG submitted to DEP work plans for additional sampling in January 2009. In March 2012, the PRG received a Notice of Deficiency (“NOD”) letter from DEP relating to the Hackensack River Study Area (“HRSA”) Supplemental Remedial Investigation Work Plan (“SRIWP”) that the PRG had submitted to the DEP in January 2009. In the NOD, DEP 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.

In August 2011, Tierra entered into a Letter of Intent with BEM Solar to study the feasibility of constructing a solar generation project on the Kearny plant site. The project was not able to secure funding and the letter of Intent expired as of December 2011. During the first quarter of 2012, the Town of Kearny filed a petition with the New Jersey Meadowlands Commission (“NJMC”) to designate the area of and surrounding the Kearny plant as an area in need of redevelopment. In August 2012, the NJMC issued a technical report recommending such designation. The board of the NJMC voted in favor of the recommendation in September 2012 and directed the NJMC to prepare a redevelopment plan. The redevelopment plan, which was adopted on February 27, 2013, excludes residential uses. The NJMC indicated that it does not intend to use its powers of condemnation to take any properties in the redevelopment area but expects “market forces” to achieve redevelopment objectives. A request for proposals to redevelop the area was posted on the Hudson County Improvement Authority (“HCIA”) website on May 15, 2013 and five proposals were submitted. The Evaluation Committee rejected one proposal for non-compliance with the Redevelopment Plan. Of the remaining four proposals, three contained plans for use and acquisition of all three parcels on the peninsula including the former Diamond Site now owned by Tierra, the former Standard Chlorine Site now owned by the Town of Kearny and the former Koppers Site now owned by the HCIA. The one remaining proposal expressed interest only in the Standard Chlorine and Koppers Sites. The Evaluation Committee issued letters seeking clarification on certain matters, addressing RFP completeness and providing additional information. The Evaluation Committee continued during the second semester of 2013 and first semester of 2014 to meet and engage in discussions with prospective re-developers. The Evaluation Committee narrowed the field to two candidates with which direct ensued, resulting in a decision in the second quarter 2014 to move forward with Morris Associates as the preferred redeveloper. As the Morris proposal did not include interest in the Diamond Site, the status of negations is not presently known. However, it is expected that Morris or another re-developer to be selected by the Town of Kearny will eventually express interest, at a minimum for access and perhaps grading easements relating to the Diamond Site and the adjacent Standard Chlorine Chemical Site. In addition, as Tierra is one of the group members implementing remediation at the adjacent Standard Chlorine Chemical Site (see below) which is included in the Morris proposal, Morris will need eventually to coordinate with the SCCC Site PRP. As of September 30, 2014, there is a total of approximately $33,9 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.

As of September 30, 2014, the Company has reserved approximately $18 million for known probable and reasonably estimable Painesville Site environmental liabilities.

• 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 September 30, 2014, 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 September 30, 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. As of September 30, 2014, Maxus continues to fund and perform the RI/FS activities, as required of Maxus and Occidental under the 1995 DFFO.

• 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 September 30, 2014, 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 September 30, 2014, no significant development activities are presently occurring, or are planned for the future, at the Painesville Site. Management advises us that 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.

Greens Bayou - Pursuant to settlement agreements with the Port of Houston Authority (the “Port”) and other parties, Tierra and Maxus are participating (on behalf of Chemicals) in the remediation of property adjoining Chemicals’ former Greens Bayou facility where DDT and certain other chemicals were manufactured. Additionally, in 2007, the parties entered into a Memorandum of Agreement (“MOA”) with federal and state Natural Resources Trustees in connection with claims for natural resources damages. In 2008, the Final Damage Assessment and Restoration Plan/Environmental Assessment were approved specifying the restoration projects to be implemented. During the first semester of 2011, Tierra negotiated, on behalf of Occidental, a draft Consent Decree with governmental agencies of the United States and Texas addressing natural resource damages at the Greens Bayou Site. The Consent Decree was signed by the parties in January 2013 and a Notice of Lodging of Proposed Consent Decree under CERCLA was published in the Federal Register on January 29, 2013 and, after a 30-day comment period, became effective on April 3, 2013. Under the Consent Decree, the settlors agree to reimburse the United States and Texas for natural resource damage assessment costs ($31 to the federal trustees), to complete two restoration projects selected by the trustees valued at approximately $800 and to reimburse the trustees for any further monitoring or corrective action obligations after completion of construction of the restoration project.  The settlement includes a covenant not to sue under CERCLA.  The remediation activities were largely finished in 2009, but some minor closure activities, as well as ongoing operations and maintenance, are still in progress. As of September 30, 2014, the Company has accounted for approximately $3 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. Limited field work at the site was completed in 2012 as the PRPs worked with EPA to evaluate the results of the investigation to date, identify remaining data gaps, and negotiate the scope of additional upland and sediment investigation activities. Ongoing discussions and disagreements regarding these issues led to EPA’s April 25, 2012 proposal regarding the scope of future sediment investigation, which was rejected by the PRP Group. The Group submitted a proposed Field Sampling Plan (FSP) on June 6, 2012 that included detailed plans for the remaining upland investigation and a phased approach to the sediment investigation. EPA responded in July 2012 to the FSP requiring expanded sediment sampling as part of the next phase of the investigation (including sampling near a recently discovered outfall on the “coal pile property” adjacent to the Site) and additional evaluation for the possible presence of distinct coal and coke layers on parts of the upland portion of the Site. In December 2012, the EPA approved the PRP Group’s revised Field Sampling Plan. During 2013, additional upland and sediment investigation activities continued pursuant to the approved Field Sampling Plan. The estimated cost of implementing the field work associated with the FSP is approximately $800. 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”). The PRP Group’s Technical Committee discussed those submittals with and subsequently received comments to the submittals from EPA and Wisconsin DNR in March 2014. The RI Report, including the BHHRA, Upland SLERA and Aquatic BERA, were submitted in June, 2014. Comments to the draft RI Report were received in October 2014 and are currently being reviewed. As of September 30, 2014 the Company has accounted for a total of $0.1 million associated with the Milwaukee Solvay site.

Other Sites – 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. The basis for the EPA’s action was that Diamond Alkali acquired the property from an Exxon Mobil affiliate and owned and operated the property as a pesticide formulating facility for a few years in the 1950s. During the first quarter of 2012, the EPA circulated a draft RI/FS AOC to Exxon Mobil and Maxus; negotiations are ongoing. In March 2013, EPA requested that Exxon and Maxus, on behalf of Occidental, perform soil remediation at 42 affected residential off-site properties, conduct further on-site investigations, and reimburse US EPA and the Kentucky regulator for their past response costs. In May 2013, US EPA and Kentucky DEP extended a settlement offer to Exxon and Maxus (acting on behalf of Occidental) pursuant to which they would make a payment to EPA and perform site investigation, and, if required site remediation, but would not be required to perform soil removal at 59 residential properties adjacent to the site. In July 2013, US EPA suspended the negotiations; in August 2013, US EPA and Kentucky DEP commenced off-site residential soil removal. In October 2013, the Kentucky environmental agency agreed to withhold issuance of an Order compelling the performance of an environmental investigation of the Black Leaf Site if Exxon and Maxus, on behalf of Occidental, agree to develop and implement a Site Investigation Work Plan. In December 2013, Exxon and Tierra (on behalf of Occidental) submitted a Site Investigation Work Plan to the Kentucky environmental agency, which was approved in August 2014. In March 2014, a third potentially-responsible party, Greif, Inc., agreed in principle to join the efforts of Exxon and Occidental at the Black Leaf Site. The site investigation work began in September 2014 and is expected to be completed in the fourth quarter of 2015. It is expected that during the first quarter of 2015 EPA and the Kentucky DEP will seek a settlement agreement with Exxon, Occidental and Greif for reimbursement of costs incurred during the performance of the off-site residential soil removal program and oversight of the site investigation. The estimated past costs of EPA and Kentucky DEP are in the range of $3-$5 million, and the estimated cost of the site investigation is the range of $2-$4 million. As of September 30, 2014, however, there is no definitive legally binding agreement either between the PRPs, on the hand and EPA and Kentucky DEP, on the other hand, or among Exxon, Occidental/Maxus and Greif regarding cost sharing, although there is a preliminary agreement in principle under which Occidental/Maxus would have a relatively small share. Maxus expects that the PRPs will enter into a Group Participation Agreement in the fourth quarter of 2014.

Tuscaloosa Site. The Company has completed remediation activities at its former Tuscaloosa, Alabama facility. As of September 30, 2014 the Company has accounted for $5.5 million to address operation and maintenance activities for the future, estimated at approximately $0.2 million annually.

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 and 2013 the PRP Group proceeded with the planning and design phase with remediation expected to take place in 2014. As of September 30, 2014 the Company has accounted for approximately $0.8 million in connection with its obligations for this matter.

Chemicals has also been designated as a PRP by the EPA under CERCLA with respect to a number of third-party sites where hazardous substances from Chemicals’ plant operations allegedly were disposed or have come to be located. Numerous PRPs have been named at substantially all of these sites. At several of these, Chemicals has no known exposure. Although PRPs are typically jointly and severally liable for the cost of investigations, cleanups, and other response costs, each has the right of contribution from other PRPs, and as a practical matter, cost sharing by PRPs is usually affected by agreement among them. At a number of these sites, the ultimate response cost and Chemicals’ share of such costs cannot be estimated at this time. As of September 30, 2014, the Company has accounted for approximately $3.5 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 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. This decision required that Maxus accept responsibility for various matters for which it had refused to indemnify Occidental since 1998, which resulted in the incurrence of costs in addition to YPF Holdings’ current accrued for this matter. This decision also required Maxus to reimburse Occidental for past costs. In 2009, Maxus received a statement from Occidental of the costs Occidental believed to be due under the judgment, in the amount of $16.7 million. In March 2009, Maxus paid $14.9 million in respect of court costs, interests through the end of 2007 and estimates of future costs for which Maxus could become liable under the declaratory judgment. In September 2009, Maxus paid to Occidental $1.9 million. As of September 30, 2013, only approximately $0.3 million of disputed claims (relating to Occidental’s internal costs) remains pending. A significant category of claims refused by Maxus on the basis of its interpretation of the 12-year clause, were claims relating to “Agent Orange”. All pending Agent Orange litigation was dismissed in December 2009. Although it is possible that additional claimants may come forward in the future, it is estimated that no significant liability will result from this category of claims. In December 2012, OCC and Maxus learned that they had been named, together with the U.S. military and other parties, as defendants in a personal injury case filed in California, alleging exposure to Agent Orange on a U.S. military base in the 1980s. This case was dismissed and is no longer pending.

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. The first hearing in the case is scheduled for January 15, 2015 in Paris, France. Maxus intends to vigorously defend the case. At this time, it is too early in the case to give an accurate assessment of the potential liability.

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

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 and posted a supersedeas bond in the amount of approximately $3,1 million. In June 2010, the Court of Appeals ruled that the District Court had committed errors in the admission of certain documents, including the Smythe Report that had been prepared by OCC for purposes of confidential settlement discussions, and the Court of Appeals remanded the case to the District Court for further proceedings. Maxus took the position that the exclusion of the evidence contained in the Smythe Report should reduce OCC’s allocation by as much as 50%; in contrast, El Paso argued that there was sufficient evidence in the record to continue to justify the allocation of the District Court. During the period July through September, 2010, the District Court judge asked the parties to reach a negotiated settlement; however, the parties were not able to reach a settlement. The District Court issued its Amended Findings of Fact and Conclusions of Law in January 2011, requiring Maxus to pay, on behalf of Occidental, 15,86% of the past and future remediation costs of one of the plaintiffs. On behalf of Occidental, Maxus filed its notice of appeal in February 2011 and its appellant´s brief in June 2011. The U.S. Court of Appeals for the Fifth Circuit affirmed the District Court’s ruling in March 2012. Maxus paid to El Paso, on behalf of OCC, $2.0 million in June 2012 and $0,9 million in November 2012 covering El Paso’s past costs for the period 2007-2011. As of September 30, 2014, Maxus has accounted for $0,9 million with respect to this matter to cover liability of El Paso’s future costs at the Turtle Bayou site.

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 2014, Maxus made a payments of $3 million each. As of September 30, 2014, Maxus has taken accounting reserves of $4 million with respect to this matter.

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. Although Maxus has received from plaintiffs a preliminary environmental site assessment, plaintiffs have not proposed a remedy or damage calculation. Arsenic, benzene, barium, and oil and grease are present at the site. Maxus is vigorously defending the case while also seeking to negotiate a settlement. However, at this time Maxus lacks sufficient information to determine with any certainty the potential exposure or costs, if any, it might have with respect to this site.

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, 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 have given 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. For these reasons, Maxus cannot quantify its liability, if any, at this time.

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

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

The Company has entered into various operating agreements and capital commitments associated with the exploration and development of it oil and gas properties, which are not material, except those of the Neptune Prospect. Total commitments for the Neptune field, located in the Atwater Valley area, consist of a minimum pipeline transportation payment obligation of $1.5 million for 2014; $1.3 million for 2015; $1.1 million for 2016 and $0.9 million thereafter.

1. SUBSEQUENT EVENTS

As of the date of the issuance of these financial statements, there are not significant subsequent events that require adjustments or disclosure in the financial statements of the Company as of September 30, 2014, 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 November 4, 2014.