Pan Andean is pleased to announce the spudding of an exploration well on our
Vrazel lease which is part of the Danbury Dome area onshore Texas.



The well has as targets three zones which may contain up to 7 billion cubic feet
of gas. At a cost of $1 million, the well will take 12 days to reach the target
depth of 9,200 feet and, if successful, can be tied in to existing pipelines
within three weeks. Pan Andean holds a 21 per cent interest in the project with
Houston Petroleum Inc, the majority partner.



Meanwhile, formal discussions continue in relation to the 75 billion cubic feet
target on our Danbury Dome leases. Pan Andean currently holds 100 per cent of
these leases and is examining proposals which may lead to a 20 per cent carry on
a $ 3 million 14,000 foot deep well.



John Teeling, Chairman commented, "Actions to develop our operations in the
highly prospective Danbury Dome area of onshore Texas continue to bear fruit.
Following the successful discovery on our, Zachery lease, I am very hopeful that
the Vrazel well will further enhance, not only our cash flow, but also the
potential and prospectivity of our 100 per cent owned Danbury Dome leases.

Iraq's oil production has again been disrupted and Yukos who account for 20% of Russia's oil exports is on the brink of being declared bankrupt. This has all happened when demand for oil is at an all time high. India and China are both expanding rapidly and have added to the pressure on oil stocks. Terrorists have stepped up their attacks within Saudi Arabia and the USA is becoming convinced that the world is too reliant on Middle East oil supplies. As a result spot prices jumped again on Friday and seem set to go much higher. This may be bad for the world's economy but will focus attention on those companies that have most to gain, i.e. small to medium sized oil producers/ explorers. Which ones will rise the most is anyones guess, so spread your risk into PRE, EEN, CPI or whatever you may fancy. Good luck!

BACKGROUND FROM PRE'S WEBSITE

Pan Andean is an exploration and production company producing oil and gas in the US and in Bolivia as well as drilling for oil/gas in Bolivia.

Pan Andean was formed in 1988 to develop Bolivian Resources
Listed on the London Alternative Investment Market (AIM)
7,000 shareholders mostly British private investors
A market capitalisation of stg25 million.
The principal assets of the company are production in the Gulf of Mexico 30% of the producing Monteagudo field in Bolivia and 10% of the large gas find in El Dorado Bolivia.
Currently Pan Andean produces about 800 bbls oil a day and 8.5 mmcf gas a day.
El Dorado may contain up to 600bcf of gas.
Exploration opportunities exist on both the Monteagudo and El Dorado blocks.
The company is examining drilling and production opportunities in the US, Bolivia and elsewhere.

Sterling Energy PLC said it started drilling on the A5 ST (Sidetrack) well on its High Island A-68 lease in the Gulf of Mexico offshore Texas. The well is the first in a drilling programme planned to more than double production during the next 12 months from recent levels of about 11 mln cubic feet of gas equivalent a day.Drilling is expected to take up to three weeks.

Sterling Energy is the operator of the lease with a 50 pct holding, while
Endeavour Oil & Gas Inc, a unit of Pan Andean Resources PLC, also has a 50 pct
holding.

Pan Andean's High Island A68 well is a 4,000 foot well located in the shallow waters offshore the Gulf of Mexico. Pan Andean holds a 50% interest in this block.

The target is a 3 10 billion cubic feet (bcf) reservoir. Drilling will take 15 days. The estimated cost is $1.8 million

John Teeling, Chairman of Pan Andean Resources, said, "High U.S. gas prices make exploration attractive. In the coming weeks and months we are drilling a number of wells to exploit our U.S. properties. The High Island 68 well is low risk. We know the geology and we have the infrastructure in place. The target is 3 bcf of gas, but it could be greater."

Pan Andean Successfully Completes Texas Well
Pan Andean Wednesday, June 30, 2004


Pan Andean reports that the Vrazel No. 2 well in the Danbury Dome area onshore Texas, is a commercial discovery expected to produce at a rate of 1.9 million cubic feet of gas per day. Tie in to existing pipelines will be completed within days.

Pan Andean holds a 21% interest in this project.

John Teeling, Chairman said, "Finally Vrazel is commercial. Drilling confirmed the presence of a number of gas zones. Technical problems greatly delayed the completion process, but now all is in place for commercial production. Current gas prices make this a profitable venture for Pan Andean.

Expected production and cash flow from Vrazel complements our other successful producer in the area, The Zachry Korenek No. 1 discovery.

These two discoveries bode well for the forthcoming drilling program on our 100% owned properties in the Danbury Dome area.

Pan Andean expects to make an announcement specific to this venture in the coming weeks.

The company's offshore drilling program is also active. A rig is in place on our 50% owned Hi Island A-68 Block in the Gulf of Mexico. I expect to announce the start up of drilling within a few days". Pan Andean reports that the Vrazel No. 2 well in the Danbury Dome area onshore Texas, is a commercial discovery expected to produce at a rate of 1.9 million cubic feet of gas per day. Tie in to existing pipelines will be completed within days.

Pan Andean holds a 21% interest in this project.

John Teeling, Chairman said, "Finally Vrazel is commercial. Drilling confirmed the presence of a number of gas zones. Technical problems greatly delayed the completion process, but now all is in place for commercial production. Current gas prices make this a profitable venture for Pan Andean.

Expected production and cash flow from Vrazel complements our other successful producer in the area, The Zachry Korenek No. 1 discovery.

These two discoveries bode well for the forthcoming drilling program on our 100% owned properties in the Danbury Dome area.

Pan Andean expects to make an announcement specific to this venture in the coming weeks.

The company's offshore drilling program is also active. A rig is in place on our 50% owned Hi Island A-68 Block in the Gulf of Mexico. I expect to announce the start up of drilling within a few days". Pan Andean reports that the Vrazel No. 2 well in the Danbury Dome area onshore Texas, is a commercial discovery expected to produce at a rate of 1.9 million cubic feet of gas per day. Tie in to existing pipelines will be completed within days.

Pan Andean holds a 21% interest in this project.

John Teeling, Chairman said, "Finally Vrazel is commercial. Drilling confirmed the presence of a number of gas zones. Technical problems greatly delayed the completion process, but now all is in place for commercial production. Current gas prices make this a profitable venture for Pan Andean.

Expected production and cash flow from Vrazel complements our other successful producer in the area, The Zachry Korenek No. 1 discovery.

These two discoveries bode well for the forthcoming drilling program on our 100% owned properties in the Danbury Dome area.

Pan Andean expects to make an announcement specific to this venture in the coming weeks.

The company's offshore drilling program is also active. A rig is in place on our 50% owned Hi Island A-68 Block in the Gulf of Mexico. I expect to announce the start up of drilling within a few days".

Maximum online buy with barclays stockbrokers is 25K.

PRE's end of year results are not going to be that exciting, probably not just as good as last years in financial terms. However, in August/September they will be commenting on the current drilling programme, the success at Vrazel and the results of DD and HI52. Production has been tailing off a bit but gas prices have averaged over 20% higher for the year. Vrazel not only adds $60,000 per month but there is the recoverable asset value of the gas that is added to the underlying value of PRE. The recoverable asset value is increasing even if production is tailing off a bit. If HI68A is successful it will add more recoverable gas to PRE again adding to the underlying value of PRE, offshore wells can be lucrative and the estimated reserves of this gas target will not be confirmed until the well is complete. Estimates fall in the region of 1-10bcf of gas but could be greater. The new gas will add to PRE's underlying shareprice and asset value, again nothing to do with production levels. Danbury Dome at 14,000ft has a 75bcf target, it could contain more it could contain less it could be non-commercial but until they drill they won't know. They have commercial wells in the nearby surrounding area therefore the risk on DD has been significantly reduced. It is an exploratory well unlike HI68 development well therefore there is slightly more risk but is in a highly commercial gas prolific region. DD also contains a 100bcf target at 17,000ft. If successful DD will add value to the recoverable gas reserves of PRE (again nothing to do with their production levels). These 2 wells could add significant recoverable gas to PRE's reserves and therefore anyone looking to acquire the company will have to pay for the new proven reserves hence adding significant underlying value. PRE do not have 200bcf of proven recoverable gas! They have about 15bcf priced in currently, El Dorado is not currently priced in they have 10% of a 200bcf recoverable asset there, there are possibly 6 appraisal wells planned for the development of El Dorado. We shall know shortly the future of Bolivian gas. The development of El Dorado will see the recoverable amount increase by many times, this however does not look like happening short-term.
All of the recent drilling and any new production coming from these wells now occurs post-March 2004 therefore will not influence their finals that will be released in September. Any success at these targets will not only enhance current production levels but also cash flow and their ability to drill further targets on HI30 and the deep DD play. Vrazel at current cash flow adds $60,000 per month to PRE, their share of the investment in this well was $210,000. If we get commercial finds on the other targets then they will pay for themselves short-term and PRE will remain debt free. PRE has raised enough cash recently to Drill HI68A, DD and another well at El Dorado. The current drilling programme, if we get continued success, will put PRE in a very healthy position. I took a larger position in PRE to compensate for the effect of the dilution around the time of the placing but the best profit is yet to come. Next well, very low risk, in-fill from an old production well, high chance of a commercial find, no guarantees in this game though. If HI68 and DD are successful they more than make up for any recent fall in production and would give PRE a higher underlying asset value than ever before. As curry stated most of us have added before this point. As PRE enhances its asset value they will have greater financial flexablity, and could borrow cash on the strength of added reserves, not to mention draw the attentions of a wider range of institutional investors.

P.S. The market vavlue of gas at Henry hub is $6.05, the wellhead is currently about $5-5.20, the asset value of US gas in the ground in approximately $1.20-1.40. You cannot use the market value of gas to assess the value of these finds to PRE. The life of field value of PRE's gas is very good with the wellhead above $5/mcf.

Development Projects

Angola

BP (12%) together with Angola's state owned Oil Company, Sonangol (20%), ChevronTexaco (32%), TotalFinaElf (12%), Norsk Hydro (12%) and Exxon Mobil (12%) are undertaking joint activities to progress a proposed Liquefied Natural Gas (LNG) project in Angola.

Initially, the plant configuration will be based on a one-train design with a throughput of four million tonnes of LNG per annum. Further joint studies will be carried out to identify the optimal solution.

Bolivia

BP, through its South American subsidiary, Pan American Energy, is pursuing a number of options to monetise Bolivian reserves. Together with BG and Repsol YPF (partners in the Margarita field in Bolivia) studies are being undertaken to examine the possibility of selling Bolivian gas to the west coast of the United States. This project would involve piping gas and condensate across the Andes to the coast of Chile or Peru. Following liquefaction the gas would then be shipped to a receiving terminal in the United Sates or Mexico.

Thats very interesting, selling bolivian gas to Peru !!


http://www.bplng.com/about/where/projects_development.asp



BP LNG - Development Projects... BP, through its South American subsidiary, Pan American Energy, is pursuing a ... are being undertaken to examine the possibility of selling Bolivian gas to the ...
www.bplng.com/about/where/projects_development.asp - 14k - 6 Jul 2004 - Cached - Similar pages



dated 6/7/04... HOT STUFF !!

This explains the penny plus drop.

Pan Andean abandons High Island A-68 well after insufficient gas shows
AFX


LONDON (AFX) - Pan Andean Resources PLC said the well drilled on High Island A-68 was plugged and abandoned after gas shows were considered insufficient for commercial production.

Pan Andean holds a 50 pct interest in the Gulf of Mexico well.

The rig is being moved to block High Island 52, where Pan Andean holds a 45 pct interest. Operations on this block, also in the Gulf of Mexico, will start early next week.

newsdesk@afxnews.com

jc

seawallwalker: That would seem to be a silly drop. Pan Andean is already underpriced but now even more so. They've abandoned this prospect after only a few days and have moved the rig elsewhere. Lets see what happens next week. Could be fun!

'The rig is being moved to block High Island 52, where Pan Andean holds a 45 pct interest. Operations on this block, also in the Gulf of Mexico, will start early next week.'

I agree it is a rubbish move by the mm, but they have to make money tto, even if at everyones expense

seawallwalker: Agreed! I'm keeping a close eye on these as I'm wondering whether to top up.

WWW.PANANDEANRESOURCES.COM

The website has had a complete makoever. Now looks very professional and alot of the information is now upto date and very informative.

Worth a look for all..

PanAndean Resources US Assets:
High Island A68 (Gulf of Mexico) - 50.00% working interest
High Island 52 (Gulf of Mexico) -50% working interest
High Island 30L (Gulf of Mexico) - 62.91% working interest
Vrazel (Texas) -21% working interest
Danbury Dome (Texas) - 20% carried interest through one well
Zachary (Texas) -7.3% working interest
Eugene Island 255 (Gulf of Mexico) - Working interest (4.375%)
North Bob West (Texas) - 1% Royalty

Pan Andeans activities in the USA (Gulf of Mexico and on shore Texas) are operated by its wholly owned subsidiary Endeavour Oil and Gas Inc. The US assets were acquired during 2000 and 2001 and have proved to be a profitable acquisition generating the majority of the Group Profits and Cash flow. The oil and gas prices were favourable during the period, averaging US$29 per barrel of oil and $4.62 per thousand cubic feet of gas (mcf). The current gas price is just under $6 per mcf and is expected to remain strong for the rest of the year. Production on our blocks is on a slow decline but recent workovers and drilling have reversed this trend.

US Natural Gas Market

Over the past 10 years the US has become increasingly dependent on Natural gas as efforts are made to move away from traditional energy sources. However over this time Natural gas supplies have not kept pace with this increase in demand. As such the market price for natural gas reflects the tight balance between natural gas supply and demand. During the 1990's price was kept low due to abundant demand however this situation has changed. Increased gas penetration, public policies and scarcity of large exploration targets will make the USA dependent on imported supplies, including LNG. US demand for natural gas is expect to grow by 38% by 2025. The impact increasing natural gas prices might have on the US economy has lead to this topic been touched upon by Alan Greenspan, Chairman of the Federal Reserve. "Today's tight natural gas markets have been a long time in coming, and futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon" Alan Greenspan, June 10, 2003.

Pan Andean Bolivian Operations

PETROLEX SA a wholly owned subsidiary of Pan Andean was acquired in September 2000. A long established private Bolivian company it has non-operating interests in two Bolivian oil concessions Monteagudo 30% and El Dorado 10%. Both blocks are joint ventured with oil majors. In Monteagudo, Repsol is a 50% partner with Petrobras of Brazil holding the remaining 20%. The El Dorado block is operated by Pan American a consortium of BP/Amoco and Bridas of Argentina.

Pan Andean produces high quality crude oil and natural gas from our 30% stake in the Monteagudo Field, in southern Bolivia. The Monteagudo Field has produced over 37 million barrels of oil since its discovery in 1968. The field is operated by Maxus, with a 30% stake and is now owned by Repsol- YPF. Repsol owns an additional 20% stake via its ownership of the privatized Bolivian oil company Andina. The remaining 20 % is held by Petrobras, the Brazilian semi-state oil company. Oil output from relatively shallow reservoirs has remained strong. There is scope to enhance production through work-overs and new infield wells.

Pan Andean owns a 10% stake in the large, strategically situated gas discovery at El Dorado, some 40 km south of the city of Santa Cruz. We have been working hard to find a market for the gas to optimize cash flow from the associated liquids production, including condensate, natural gasoline, and GTL. Pan American Energy, part of the BP GROUP, owns the balance of the block. BP has large interests elsewhere in Bolivia, primarily via the privatized state company Chaco. Pan American's main current focus is on their Liquefied Natural Gas project aiming to sell gas form their stake in the mega - gas fields of southern Bolivia, via a pipeline to the Pacific Ocean and or by tanker to Mexico and the Californian market. We are working on a number of options to generate early value added for shareholders from the El Dorado discovery. The best option is to tap into the nearby gas export pipeline to Brazil. We are situated within 30 km of the gas gathering station and appear to have a considerable transport cost advantage. However, lower than expected volumes into the Brazil gas market has delayed securing a market in Brazil for the El Dorado Field. Accordingly our priority is to secure an early gas market and produce the associated liquids. For this purpose we are working on a gas to liquids facility, which would process 20 million cubic feet per day of natural gas. This is the sustainable production capacity today available from the two discovery wells at El Dorado.

Why Bolivia? Other contributing factors:

Recent gas finds include discoveries by Total, Petrobras and British Gas.
Discovered gas has risen from 7 tcf to 46 tcf.
High commercial hit rate at 1 in 6 exploration wells.
Low taxation and royalties. Freely convertible currency (informal dollar link).
Low inflation (<15% yearly).
No restrictions on foreign ownership.
Established, fair legal system.
Very low crime levels (lowest in the Americas).
1996 Hydrocarbon Law provides low taxes and good title, as well as reasonable work commitments but includes an annual rent of $1 per hectare per concession.

8th July 2004 - Drilling Update

Pan Andean Resources announces that the well drilled on High Island A-68, in which Pan Andean holds a 50% interest, reached target depth yesterday. Although gas shows were reported and one potentially productive sand identified from logs, overall it was felt that this was insufficient for commercial production. The hole is therefore being plugged and abandoned. The rig is being moved to block High Island 52, where Pan Andean holds a 45% interest. Operations on this block will commence early next week.

PanAndean Resources PLC
US Assets:
High Island A68 (Gulf of Mexico) - 50.00% working interest
High Island 52 (Gulf of Mexico) -50% working interest
High Island 30L (Gulf of Mexico) - 62.91% working interest
Vrazel (Texas) -21% working interest
Danbury Dome (Texas) - 20% carried interest through one well
Zachary (Texas) -7.3% working interest
Eugene Island 255 (Gulf of Mexico) - Working interest (4.375%)
North Bob West (Texas) - 1% Royalty

Pan Andeans activities in the USA (Gulf of Mexico and on shore Texas) are operated by its wholly owned subsidiary Endeavour Oil and Gas Inc. The US assets were acquired during 2000 and 2001 and have proved to be a profitable acquisition generating the majority of the Group Profits and Cash flow. The oil and gas prices were favourable during the period, averaging US$29 per barrel of oil and $4.62 per thousand cubic feet of gas (mcf). The current gas price is just under $6 per mcf and is expected to remain strong for the rest of the year. Production on our blocks is on a slow decline but recent workovers and drilling have reversed this trend.

US Natural Gas Market

Over the past 10 years the US has become increasingly dependent on Natural gas as efforts are made to move away from traditional energy sources. However over this time Natural gas supplies have not kept pace with this increase in demand. As such the market price for natural gas reflects the tight balance between natural gas supply and demand. During the 1990's price was kept low due to abundant demand however this situation has changed. Increased gas penetration, public policies and scarcity of large exploration targets will make the USA dependent on imported supplies, including LNG. US demand for natural gas is expect to grow by 38% by 2025. The impact increasing natural gas prices might have on the US economy has lead to this topic been touched upon by Alan Greenspan, Chairman of the Federal Reserve. "Today's tight natural gas markets have been a long time in coming, and futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon" Alan Greenspan, June 10, 2003.

Danbury Dome:

The Danbury Dome area is located 40 miles south of the city of Houston, Texas. In September 2003 Endeavour acquired the 60% interest in the Korenek leases held by El Paso Production Oil and Gas. Endeavour now owns 100% of the Korenek and Vieman leases covering 1,029 acres. In addition, Endeavour has leased 253 acres adjoining the Block. Geologic and seismic studies have identified three drilling prospects with potential reserves of 75 billion cubic feet of gas at depths between 12,000 ft. to 14,000 ft. in the Deep Frio Sands and Anomalina Sands. The wells are estimated to cost 3 million US$ per well completed. In addition we are studying the potential of the "Golden Eye Yegua Project" at 17,000 ft estimated to contain 100 billion cubic feet of gas. Endeavour also owns the Korenek no. 4 well - a 12,550 ft. deep producing gas well. Although the no. 4 well is only marginally productive, at present, it has significant work over potential. The gas pipeline infrastructure is in place so any new discovery can be rapidly developed.

What does Pan Andean do ?

Pan Andean formed in 1988 is listed on AIM with 7000 shareholders.
Pan Andean is debt free, cash positive producing oil & gas in the US and Bolivia.
Pan Andean has proven and probable reserves of over 3 million barrels equivalent in the US and over 2mbbls proven and probable oil equivalent in Bolivia.
Pan Andean has exploration projects in the US and in South America.
Pan Andean Oil & Gas Production
Pan Andean produces over 300 bbls oil a day.

Pan Andean Development Strategy
Pan Andean's strategy is to lever management's hydrocarbon experience, South American knowledge and financial market access, to develop into a significant oil and gas producer in South America. Political uncertainty is delaying implementation.
Bolivia will be the prime energy supplier to Brazil. We have the best placed reserves in El Dorado and up to 3.6 tcf deep gas potential at Monteagudo.
A major investment in producing assets, with exploration potential, in Venezuela is on hold due to political uncertainty.
An acquisition in Argentina, which has production and exploration potential, is developing slowly due to uncertainty.

THE FUTURE

The future looks good. Pan Andean is profitable and cash generative with significant drilling opportunities on our US assets and an exciting GTL project in Bolivia. Our increasing cash flow, AIM listing, liquid share and 7000 shareholder base attracts many exploration and development proposals. We are examining high potential projects in the Americas with one close to a decision. Outside of the Americas we are working our way through three projects. We are fully aware of the need to build shareholder value.

John Teeling

Chairman