##### 



inancial tatements
  Years Ended December 31, 2006, 2005 and 2004




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Contents
 Report of Independent Auditors
    
    
    1Audited Financial StatementsBalance Sheets
    
    
    2Statements of Income
    
    
    3Statements of Shareholders Equity
    
    
    4Statements of Cash Flows
    
    
    5Notes to Financial Statements
    
    
    6




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1




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December 312006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    796,064
    
    
    $
    457,933Restricted cash and cash equivalents
    
    
    15,585,279
    
    
    
    19,440,078Accounts receivable (net of allowance for
doubtful accounts of $1,817,160 in 2006 and none in 2005):Trade  PDVSA Petroleo, S.A.
    
    
    22,297,096
    
    
    
    26,585,922Affiliates
    
    
    111,167
    
    
    
    79,206Other
    
    
    203,176
    
    
    
    109,962Prepaid expenses
    
    
    6,481,779
    
    
    
    6,001,915Total current assets
    
    
    45,474,561
    
    
    
    52,675,016Restricted cash and cash equivalents
    
    
    10,433,344
    
    
    
    10,922,884Property, plant and equipment, net
    
    
    127,431,646
    
    
    
    139,175,067Deferred financing costs, net
    
    
    3,402,604
    
    
    
    3,896,015Other assets
    
    
    78,270
    
    
    
    78,270Total assets
    
    $
    186,820,425
    
    
    $
    206,747,252Liabilities and Shareholders EquityCurrent liabilities:Accounts payable:Trade
    
    $
    1,054,595
    
    
    $
    956,880Affiliates
    
    
    401,351
    
    
    
    459,973Accrued liabilities
    
    
    7,766,149
    
    
    
    6,534,053Value-added tax payable
    
    
    2,239,173
    
    
    
    3,040,060Foreign taxes payable
    
    
    11,640,790
    
    
    
    6,859,804Accrued interest
    
    
    975,838
    
    
    
    1,115,244Notes payable due within one year
    
    
    11,868,132
    
    
    
    11,868,132Total current liabilities
    
    
    35,946,028
    
    
    
    30,834,146Notes payable due after one year
    
    
    71,208,790
    
    
    
    83,076,923Deferred foreign income taxes
    
    
    25,530,000
    
    
    
    22,472,000Shareholders equity:Common stock, class A, $1 par value, 25,000 shares
authorized, issued and outstanding
    
    
    25,000
    
    
    
    25,000Common stock, class B, $1 par value, 12,500 shares
authorized, issued and outstanding
    
    
    12,500
    
    
    
    12,500Additional paid-in capital
    
    
    60,516,037
    
    
    
    60,516,037(Accumulated deficit) / retained earnings
    
    
    (6,417,930
    )
    
    
    9,810,646Total shareholders equity
    
    
    54,135,607
    
    
    
    70,364,183Total liabilities and shareholders equity
    
    $
    186,820,425
    
    
    $
    206,747,252
  See accompanying notes.
 2




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Years Ended December 312006
    
    
    2005
    
    
    2004Revenues
    
    $
    60,901,814
    
    
    $
    61,814,039
    
    
    $
    63,231,208Costs and expenses:Operating expenses, exclusive of items shown
separately below
    
    
    15,212,453
    
    
    
    12,590,226
    
    
    
    12,268,768Depreciation
    
    
    12,189,451
    
    
    
    12,129,857
    
    
    
    12,212,632General and administrative expenses
    
    
    4,561,578
    
    
    
    2,481,862
    
    
    
    4,374,371Total costs and expenses
    
    
    31,963,482
    
    
    
    27,201,945
    
    
    
    28,855,771Operating income
    
    
    28,938,332
    
    
    
    34,612,094
    
    
    
    34,375,437Other (income) expense:Interest expense
    
    
    8,879,988
    
    
    
    9,997,582
    
    
    
    11,118,652Interest income
    
    
    (1,393,637
    )
    
    
    (708,463
    )
    
    
    (334,736
    )Foreign currency transaction (gain) loss
    
    
    (1,060,530
    )
    
    
    565,288
    
    
    
    738,236Other (income) expense, net
    
    
    21,808
    
    
    
    (39,193
    )
    
    
    56,102Total other (income) expense
    
    
    6,447,629
    
    
    
    9,815,214
    
    
    
    11,578,254Income before provision for foreign income taxes
    
    
    22,490,703
    
    
    
    24,796,880
    
    
    
    22,797,183Provision for foreign income taxes
    
    
    14,719,279
    
    
    
    9,677,000
    
    
    
    4,089,000Net income
    
    $
    7,771,424
    
    
    $
    15,119,880
    
    
    $
    18,708,183
  See accompanying notes.
 3




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(AccumulatedAdditional
    
    
    Deficit)Common Stock
    
    
    Paid-In
    
    
    RetainedClass A
    
    
    Class B
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalance, December 31, 2003
    
    $
    25,000
    
    
    $
    12,500
    
    
    $
    60,516,037
    
    
    $
    12,482,583
    
    
    $
    73,036,120Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,708,183
    
    
    
    18,708,183Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,000,000
    )
    
    
    (16,000,000
    )Balance, December 31, 2004
    
    
    25,000
    
    
    
    12,500
    
    
    
    60,516,037
    
    
    
    15,190,766
    
    
    
    75,744,303Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,119,880
    
    
    
    15,119,880Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,500,000
    )
    
    
    (20,500,000
    )Balance, December 31, 2005
    
    
    25,000
    
    
    
    12,500
    
    
    
    60,516,037
    
    
    
    9,810,646
    
    
    
    70,364,183Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,771,424
    
    
    
    7,771,424Dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,000,000
    )
    
    
    (24,000,000
    )Balance, December 31, 2006
    
    $
    25,000
    
    
    $
    12,500
    
    
    $
    60,516,037
    
    
    $
    (6,417,930
    )
    
    $
    54,135,607
 See accompanying notes.
 4




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Years Ended December 312006
    
    
    2005
    
    
    2004Operating ActivitiesNet income
    
    $
    7,771,424
    
    
    $
    15,119,880
    
    
    $
    18,708,183Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    12,189,451
    
    
    
    12,129,857
    
    
    
    12,212,632Amortization of deferred financing costs
    
    
    493,411
    
    
    
    493,410
    
    
    
    493,410Provision for deferred foreign income taxes
    
    
    3,058,000
    
    
    
    2,846,000
    
    
    
    3,205,000Provision for uncollectible accounts
    
    
    1,817,160
    
    
    
    
    
    
    
    1,620,042Gain on sale of assets
    
    
    (38,872
    )
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable  trade and other
    
    
    2,378,452
    
    
    
    1,859,324
    
    
    
    (8,742,470
    )Prepaid expenses
    
    
    (479,864
    )
    
    
    (2,281,179
    )
    
    
    (419,543
    )Other assets
    
    
    
    
    
    
    (10,999
    )
    
    
    1,088Trade accounts payable
    
    
    97,715
    
    
    
    337,830
    
    
    
    339,213Receivables/payables with affiliates
    
    
    (90,583
    )
    
    
    130,708
    
    
    
    4,491,508Accrued liabilities
    
    
    1,232,096
    
    
    
    (828,101
    )
    
    
    (1,646,294
    )Value-added tax payable
    
    
    (800,887
    )
    
    
    48,850
    
    
    
    1,608,348Foreign taxes payable
    
    
    4,780,986
    
    
    
    5,975,804
    
    
    
    (430,134
    )Accrued interest
    
    
    (139,406
    )
    
    
    (136,542
    )
    
    
    (141,641
    )Net cash provided by operating activities
    
    
    32,269,083
    
    
    
    35,684,842
    
    
    
    31,299,342Investing ActivitiesPurchases of property, plant and equipment
    
    
    (446,276
    )
    
    
    (1,071,800
    )
    
    
    (199,974
    )Proceeds from sale of property, plant and equipment
    
    
    39,118
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (407,158
    )
    
    
    (1,071,800
    )
    
    
    (199,974
    )Financing ActivitiesPayments of notes payable
    
    
    (11,868,133
    )
    
    
    (11,868,132
    )
    
    
    (11,868,132
    )Dividends paid
    
    
    (24,000,000
    )
    
    
    (20,500,000
    )
    
    
    (16,000,000
    )Changes in restricted cash
    
    
    4,344,339
    
    
    
    (2,181,950
    )
    
    
    (3,268,488
    )Net cash used in financing activities
    
    
    (31,523,794
    )
    
    
    (34,550,082
    )
    
    
    (31,136,620
    )Net increase (decrease) in cash and cash equivalents
    
    
    338,131
    
    
    
    62,960
    
    
    
    (37,252
    )Cash and cash equivalents, beginning of year
    
    
    457,933
    
    
    
    394,973
    
    
    
    432,225Cash and cash equivalents, end of year
    
    $
    796,064
    
    
    $
    457,933
    
    
    $
    394,973Supplemental Disclosures of Cash Flow InformationForeign income taxes paid
    
    $
    6,157,239
    
    
    $
    3,171,761
    
    
    $
    1,137,527Interest paid
    
    $
    8,525,947
    
    
    $
    9,640,713
    
    
    $
    10,766,882
 See accompanying notes.
 5




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1. Organization and Description of Business
   2. Summary of Significant Accounting Policies
 Reclassifications
  Use of Estimates
  6




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2. Summary of Significant Accounting Policies (continued)
 Cash and Cash Equivalents
  Restricted Cash and Cash Equivalents
  Accounts Receivable
  Property, Plant and Equipment
  7




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2. Summary of Significant Accounting Policies (continued)
  Accounting for Asset Retirement
Obligations,
 Revenue Recognition Policy
   Impairment of Long-lived Assets
  8




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2. Summary of Significant Accounting Policies (continued)
 Provision for Severance Benefits
  Foreign Currency
  Income Taxes
  3. Risks and Uncertainties
   9




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3. Risks and Uncertainties (continued)
     10




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3. Risks and Uncertainties (continued)
   4. Related Party Transactions
   2006
    
    
    2005Accounts receivable:WilPro Energy Services (PIGAP II) Limited
    
    $
    110,925
    
    
    $
    79,206Williams International Services Company
    
    
    242
    
    
    
    $
    111,167
    
    
    $
    79,206Accounts payable:Williams International Venezuela Limited
    
    $
    401,351
    
    
    
    351,170Williams International Services Company
    
    
    
    
    
    $
    108,803$
    401,351
    
    
    $
    459,973
 11




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5. Property, Plant and Equipment
  2006
    
    
    2005Natural gas compression plant facilities
    
    $
    221,415,441
    
    
    $
    221,295,285Spare parts
    
    
    616,418
    
    
    
    681,380Vehicles
    
    
    783,556
    
    
    
    629,112Leasehold improvements
    
    
    912,748
    
    
    
    842,838Computer software and equipment
    
    
    580,034
    
    
    
    531,824Other
    
    
    1,022,883
    
    
    
    1,005,533225,331,080
    
    
    
    224,985,972Accumulated depreciation
    
    
    (97,899,434
    )
    
    
    (85,810,905
    )$
    127,431,646
    
    
    $
    139,175,067
 6. Notes Payable
  2006
    
    
    2005Overseas Private Investment Corporation:9.45% note payable, due in equal
quarterly principal payments of
$2,678,571 plus interest, maturing
November 15, 2013
    
    $
    75,000,000
    
    
    $
    85,714,2869.17% note payable, due in equal
quarterly principal payments of
$288,462 plus interest, maturing
November 15, 2013
    
    
    8,076,922
    
    
    
    9,230,76983,076,922
    
    
    
    94,945,055Notes payable due within one year
    
    
    11,868,132
    
    
    
    11,868,132Notes payable due after one year
    
    $
    71,208,790
    
    
    $
    83,076,923
 12




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6. Notes Payable (continued)
    7. Income Taxes
   2006
    
    
    2005Deferred tax liabilities:Property, plant and equipment
    
    $
    24,373,000
    
    
    $
    21,146,000Deferred financing costs
    
    
    1,157,000
    
    
    
    1,326,000Total deferred tax liabilities
    
    $
    25,530,000
    
    
    $
    22,472,000
 13




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7. Income Taxes (continued)
  2006
    
    
    2005
    
    
    2004Current
    
    $
    11,661,279
    
    
    $
    6,831,000
    
    
    $
    884,000Deferred
    
    
    3,058,000
    
    
    
    2,846,000
    
    
    
    3,205,000Total
    
    $
    14,719,279
    
    
    $
    9,677,000
    
    
    $
    4,089,000
  2006
    
    
    2005
    
    
    2004Provision at statutory rate (34%)
    
    $
    7,647,000
    
    
    $
    8,431,000
    
    
    $
    7,751,000Increase (decrease) in tax resulting from:Income/expense not subject to tax
    
    
    (405,000
    )
    
    
    (226,000
    )
    
    
    (88,000
    )Inflation Adjustment
    
    
    (1,525,000
    )
    
    
    (759,000
    )
    
    
    1,097,000Exchange rate impact on fixed asset
accounting
    
    
    5,422,000
    
    
    
    5,449,000
    
    
    
    5,230,000Addition to tax reserves
    
    
    2,159,000
    
    
    
    
    
    
    
    Return to accrual and other
permanent adjustments
    
    
    1,421,279
    
    
    
    (338,000
    )
    
    
    2,672,000Utilization of business asset tax
(BAT), investment tax credit (ITC)
and net operating loss (NOL)
carry-forwards
    
    
    
    
    
    
    
    
    
    
    (5,330,000
    )Currency losses
    
    
    
    
    
    
    (2,880,000
    )
    
    
    (7,243,000
    )Total Provision for Income Tax
    
    $
    14,719,279
    
    
    $
    9,677,000
    
    
    $
    4,089,000
 8. Financial Instruments
  Cash and cash equivalents and restricted cash and cash equivalents:
 14




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8. Financial Instruments (continued)
 Notes payable:
 2006
    
    
    2005Asset (liability)
    
    Carrying amount
    
    Fair value
    
    Carrying amount
    
    Fair value
 Cash and cashequivalents
    
    $
    796,064
    
    
    $
    796,064
    
    
    $
    457,933
    
    
    $
    457,933Restricted cash andcash equivalents
    
    
    26,018,623
    
    
    
    26,018,623
    
    
    
    30,362,962
    
    
    
    30,362,962Notes payable
    
    
    (83,076,922
    )
    
    
    (84,782,308
    )
    
    
    (94,945,055
    )
    
    
    (102,370,424
    )
 15