Pan Andean FY revenue up 10%, drilling in Peru and Colombia to commence next year

Tuesday, September 29, 2009

South America and Gulf of Mexico operating Irish gas company Pan Andean Resources (AIM: PRE) said revenues and earnings in the full year to 31 March increased, and also reported good progress in South America, but expects its income from the US operations to decline as drilling is unlikely to continue in 2009 due to the fall in gas prices.

The company’s full year revenues amounted to £1.85 million, up from last year’s £1.67 million, while pre-tax profits slid to £0.98 million from £1.2 million, but earnings per share increased to 0.58 pence from 0.39 pence.

Most of the company’s profits were generated in the United States, where the company is entitled to royalties of 1.32% and 2.15% from the Gryphon and Phoenix rigs respectively, both of which operate on the High Island 52 block, producing 20 million cubic feet of gas per day (mmcfd) and 6 million mmcfd respectively. Pan Andean, which made profits of £1.5 million for the year in the United States, envisages a substantial decline of income due to the currently low gas prices, which make drilling in the remainder of 2009 unlikely.

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Pan Andean also said its development and exploration efforts in Peru and Colombia, funded with the cash flow from its US operations, are bearing fruit as the first wells in Colombia are expected to be drilled early next year, while the deep wells in Peru will commence either late next year or early in 2011, adding the period of scarce newsflow its reaching its end.

The company has entered two joints ventures (JVs) to develop blocks 114 and 131 in the Ucayali basin and block 141 in the Altiplano around Lake Titicaca and was awarded block 161 in Peru and is currently discussing possible JV agreements to develop the Antorcha block in Colombia, which has estimated oil reserves of 600 million to 1.6 billion barrels with a 10% to 15% recovery.

“Our ground position in Peru and Colombia is outstanding but the large targets we are chasing are costly to drill, particularly in the deep Peruvian jungle. We expand our scope and reduce our risk by joint venturing. Our partners are world ranking companies with the cash, skills and appetite to take on high risk, high potential projects,” said Pan Andean’s chairman John Teeling.

The company’s future operations in Bolivia remain in question as the government is yet to define its energy policy and determine the legal status of Pan Andean’s Monteagudo and El Dorado gas fields.

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