Petro Andina Resources Inc.

Petro Andina Resources Inc.

December 11, 2008 17:16 ET

Petro Andina Acquires Exploration Blocks in Colombia

CALGARY, ALBERTA--(Marketwire - Dec. 11, 2008) - Petro Andina Resources Inc. (TSX:PAR) (Petro Andina or the Company) is pleased to announce that the Agencia Nacional de Hidrocarburos de Colombia or Colombian National Hydrocarbons Agency (ANH) has posted confirmation that Petro Andina was the successful bidder for the right to negotiate for Exploration and Production Contracts on four exploration blocks in the Republic of Colombia at the Colombia Mini Round 2008. Petro Andina acted under a Joint Bidding Agreement with its partner, Columbus Energy (Columbus), a wholly owned subsidiary of Remora Energy International, L.P., a company already established and active in Colombia, to take Blocks LLA-16, LLA-20, LLA-29 and LLA-30 in the prolific Llanos Basin. Under the terms of the Mini Round 2008, bidders committed to a minimum work program proscribed for each block and then bid a supplemental work program plus an "X-Factor" or additional royalty.

Petro Andina will be operator of record of the blocks with a 50 percent working interest. The four blocks cover an area of approximately 495,000 gross acres, and each have exploration periods of six years comprised of two, three-year phases. The first exploration phase will involve the acquisition of three dimensional (3D) seismic data and the drilling of exploration wells by Petro Andina and Columbus. The total net cost to Petro Andina to complete this exploratory work is approximately $US 46 million. In addition to the work commitments, Petro Andina and Columbus bid an X-factor of one percent (equivalent to a one percent royalty) to the ANH.

Petro Andina's long-term business development strategy has been to identify countries with favourable fiscal regimes and good potential for significant oil discoveries. The acquisition of these exploration blocks in a highly prospective basin provides Petro Andina with an excellent opportunity to further expand its exploration portfolio in the Company's core Latin America/Caribbean region. The newly acquired blocks have world-class exploration potential in an established oil producing region.

Blocks 16 and 20 surround an existing 50 million barrel oil field, discovered in 1974. The blocks currently have approximately 1,300 kilometers of existing two-dimensional (2D) seismic data which show several promising leads.

Blocks 29 and 30 are on trend with the Oropendola block which is owned 100% and operated by Columbus. Collectively, these blocks have approximately 650 kilometers of existing 2D seismic data and evaluation of the blocks was conducted with the benefit of 3D seismic and well information from the adjacent Columbus lands.

"Our new acreage in Colombia provides an excellent complement to our established Argentina core area and our longer term exploration position in Trinidad", said Wayne Foo, president of Petro Andina. "The area offers relatively low risk structural leads typical of the Llanos Basin as well as higher risk potential for larger accumulations. Project cycle times are relatively short and the fiscal regime under the Mini Round terms are excellent."

Colombia has a well established oil and gas industry with 1.6 billion barrels of remaining proved recoverable oil reserves at year-end 2007 and current production of approximately 528,000 barrels of oil per day. The fiscal terms are governed through concession agreements with the ANH that were established in 2004 and involve the payment of royalties and taxes. The Contractor holds 100 percent of the rights to production once the royalty and X-factor are paid. The Colombia fiscal regime is considered to be one of the most favourable in the region.

The Blocks will be subject to standard ANH contracts and Petro Andina anticipates signing the contracts in the first quarter of 2009, pending final approval of the Directive Counsel of the ANH.

Under the Company's 2009 budget projections, Petro Andina anticipates that its operations in Argentina will generate positive cash flow in excess of the reinvestment required in Argentina. This free cash flow stream, together with cash on hand, is available to be deployed to fund the Company's commitments in Colombia as well as other new business development activities in Argentina and Trinidad. The Company has flexibility with respect to the amount and timing of its capital investment in Trinidad and Colombia.

In a parallel press release the Company has analyzed the potential impact of the Government of Argentina's recently announced Petroleo Plus Program on 2009 cash flows from operations.

To view a map of the exploration blocks, click the following link:

About Petro Andina Resources Inc.

Petro Andina is engaged in the exploration for and development and production of oil and natural gas in South America and the Caribbean. The Corporation is continuing to develop its existing reserves and to conduct appraisal and exploration drilling on its 628,000 acre (346,000 acre net) land position in the Neuquen basin of Argentina. Petro Andina is headquartered in Calgary, Canada.

This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction. All sales will be made through registered securities dealers in jurisdictions where the offering has been qualified for distribution. The securities offered are not, and will not be, registered under the securities laws of the United States of America, nor any state thereof and may not be sold in the United States of America absent registration in the United States or the availability of an exemption from such registration.

Forward-Looking Statements

Certain statements regarding Petro Andina Resources Inc., including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities laws and necessarily involve known and unknown risks and uncertainties, most of which are beyond Petro Andina's control. These risks may cause actual financial and operating results, performance, levels of activity and achievements to differ materially from those expressed in, or implied by, such forward-looking statements.

Such risks and uncertainties include, but are not limited to: the impact of general economic conditions in Canada, Argentina and Trinidad and Tobago, industry conditions including changes in laws and regulations including adoption of new environmental laws and regulations, and changes in how they are interpreted and enforced, in Canada, Argentina and Trinidad and Tobago, competition, the lack of availability of qualified personnel, fluctuations in commodity prices, the results of exploration and development drilling and related activities, imprecision in reserve estimates, the production and growth potential of Petro Andina's assets, fluctuations in foreign exchange or interest rates, the ability to access sufficient capital from internal and external sources, and obtaining required approvals of regulatory authorities, in Canada, Argentina and Trinidad and Tobago. Many of these risk factors are discussed in further detail in the Corporation's Annual Information Form dated March 28, 2008 on file with Canadian securities commissions. Readers are also referred to the risk factors described in other documents that Petro Andina files from time to time with securities regulatory authorities.

Accordingly, Petro Andina gives no assurance nor makes any representations or warranty that the expectations conveyed by the forward-looking statements will prove to be correct and actual results may differ materially from those anticipated in the forward-looking statements. Petro Andina undertakes no obligation to publicly update or revise any forward-looking statements.

Non-GAAP Terms

Funds flow from operations and operating netback per barrel are used in this document, but do not have any standardized meaning under generally accepted accounting principles (GAAP) and may not be comparable to similarly defined measures presented by other companies. Funds flow from operations includes all cash generated from operating activities and is calculated before changes in non-cash working capital. Funds flow from operations is reconciled with net earnings in the Consolidated Statements of Cash Flows. Funds flow per share is calculated by dividing funds flow from operations by the weighted average number of shares outstanding. Operating netback per barrel equals sales revenue, less royalties, production expenses, and transportation expenses, divided by total equivalent sales volumes. Management uses these non-GAAP measures for its own performance measurement and to provide its shareholders and investors with additional measurement of the Company's efficiency and its ability to fund a portion of its future growth expenditures.

The Toronto Stock Exchange has not received and does not accept responsibility for the adequacy or accuracy of this news release.

Contact Information

  • Petro Andina Resources Inc.
    Melesia Kasha
    Investor Relations
    (403) 237-1700
    (403) 265-8216 (FAX)
    Petro Andina Resources Inc.
    Ken Pinsky
    Vice President, Finance and Chief Financial Officer
    (403) 517-1729
    (403) 265-8216 (FAX)