Pan Andean profits up 19%

HIGHER oil and gas prices were good news for Pan Andean Resources as the publicly quoted exploration company reported a 19% increase in first-half profits yesterday.

Pre-tax profits rose to £359,000 (€520,000) for the six months to September although revenues fell almost 40% to £1.2 million (€1.7m) as the group focused on a smaller number of projects. Operating costs halved to £805,000 (€1.17m).

Chairman John Teeling said the main focus in 2004 had been on exploring new sites. Pan Andean drilled two wells in the US state of Texas, one in the Gulf of Mexico and a fourth in Bolivia. The results of the drilling programme were mixed, however.

Oil was found in the two Texan wells. One is producing monthly income of $40,000 for the company but caused “significant” mechanical and technical problems over a four-month period.

But the Gulf of Mexico project yielded neither oil nor gas and will end up costing Pan Andean $800,000 for no return. The Bolivian site contained gas but also proved difficult to test below 4,000 metres.

Dr Teeling said income would grow significantly in the year ahead with the coming on stream of the Blackstone Ivory well in Texas and the return to action of an older Gulf of Mexico well that had been closed for upgrading work.

The company completed a fresh fundraising round during the period and raised more than £2.7m (€3.92m). Dr Teeling said the company was profitable, generating cash and debt-free with more than £2m (€2.9m) in cash to fund drilling programmes.

“We are an explorer by orientation and plan to advance additional drilling prospects during 2005,” he said. Projects in Europe and the Middle East are being examined by the company.

Dr Teeling also said the company’s future profitability would depend on movements in world oil and gas prices but that he would keep a tight grip on costs while stepping up efforts to find new ventures.

Shares fell 1p, or 7%, on London’s Alternative Investment Market after the results were announced.