Pensana Plc Regulatory News (PRE)

19 Jul 2006 07:30

Pan Andean Resources PLC19 July 2006 PAN ANDEAN RESOURCES PLC PAN ANDEAN RESOURCES SIGNS CONTRACT TO EXPLORE & PRODUCE OIL & GAS ON LOT 114 INPERU • 400 million barrel prospective oil resource. • Attractive terms of 5% royalty rising to 20% on daily production of 100,000 barrels, corporate tax at 30%. • Seven year exploration phase, thirty year production phase. Pan Andean Resources PLC ("Pan Andean" or "the Company") the AIM listed oil andgas producer (AIM:PRE) is pleased to announce that it has signed an explorationand exploitation contract with Perupetro SA (the Peruvian state oil company) onbehalf of the Republic of Peru. Under this contract, Pan Andean will explorefor oil/gas and if successful, produce on Lot 114 in the hydrocarbon richUcayali and Huanuca area of Central Peru. The concession (90% Pan Andean),which covers 770,000 hectares, is on trend with the giant Camisea gas field butis expected to be oil prone. During the 1970's and 1980's, 4 wells were drilled on the block, allencountering oil shows, but were not developed at the time due to low oilprices. CCP consultants, technical advisors to Pan Andean, estimate that Lot114 has a prospective resource of over 400 million barrels of oil. The License Contract for Lot 114 includes a 7 year exploration phase, extendablefor 3 additional years, and a total contract term of 30 years for oil productionand 40 years for natural gas and condensate. In the initial 18 months, PanAndean is committed to a geological study of the contract area and to thereinterpretation of 1,000 kms of existing seismic data which was mainly shot inthe 1970s and 1980s. The Pan Andean work plan for Lot 114 includes early drilling of the Rio Cacostructure, which is already covered by approximately 350 kilometers of seismiclines. A discovery well in 1976 encountered good quality oil, 33degrees API,but due to the limitations of technology then available, the well apparently hitthe reservoir's flank at the oil-water contact. CCP consultants to Pan Andean,have estimated a P3 potential resource of 90 million barrels of oil recoverablein the Rio Caco structure. Pan Andean believes that reprocessing and reinterpreting available seismic data,utilising state-of-the-art techniques, will enable Pan Andean to optimallylocate a first well, with drilling scheduled for August 2007. The Board of Pan Andean believes that Peru has an attractive oil exploration anddevelopment environment. Impressive annual economic growth of 6% for the past 4years is forecast to improve to 7% for 2007. Country risk, as measured by bondyields, is lower than Brazil and similar to Chile. Foreign investment isstrong, particularly in natural resources, Oil and gas legislation is modern andtransparent, with royalties ranging from 5% to 20% depending on productionvolumes. There is a corporate income tax rate of 30%. Pan Andean has 20 years oil and gas exploration and production experience inneighboring Bolivia and has an experienced South American team headed byMauricio Gonzales, which is well capable of fast tracking this project. Managing Director, David Horgan, said: "We are very pleased with this contract which represents the culmination of 2years intensive work by our South American team. We have had good support fromlocal technical partners and from the Peruvian authorities. New exploration, development and transport technologies, offer significantopportunities in areas where oil and gas is known to exist but were previouslyuneconomic to develop. The high oil price, good commercial terms and thedevelopment of the eastern region make Peru an attractive place to do business. We feel confident that acquiring the coveted Lot 114 concession will be thefoundation for building a significant presence in Peru." This announcement has been approved by Dr. Jorge Flores, Technical Consultant toPan Andean. Dr. Flores has 45 years oil experience with particular emphasis onAndean oil producing basins. Contacts: David Horgan + 353 87 292 3500John Teeling +353 1 833 2833 College HillPaddy Blewer +44 (0) 20 7457 2020 Rowan DartingtonIan Rice +44 (0) 1179 330 020 www.panandeanresources.com Background Pan Andean, which is Irish based, produces oil and gas in Bolivia, onshore Texasand in the Gulf of Mexico. In Texas, the company has 3 producing projects onshore and two off-shore. Established in 1988 with over 6,000 shareholders, Pan Andean is an originalmember of AIM, listing in 1995. It has 119 million shares in issue and iscapitalised at £12million. The principal current source of income is the Gryphon royalty on Block HighIsland 52 in the Gulf of Mexico yielding over $140,000 a month. A significant source of income, the 300 barrel a day 63% owned High Island Block30 in the Gulf, is shut in, awaiting availability of supply boats to completerepairs to pipelines. In Bolivia, oil and gas production at Monteagudo (30% Pan Andean) continueswhile the Company awaits the outcome of recent nationalisation legislation. Thelarge El Dorado gas discovery (10% Pan Andean) remains undeveloped. The Company is actively working to develop new exploration projects on their USacreage both onshore and offshore. This information is provided by RNS The company news service from the London Stock Exchange