Petro Andina Resources Inc.

Petro Andina Resources Inc.

June 26, 2009 09:48 ET

Petro Andina Announces Realization of Argentine Petroleum Plus Credits

CALGARY, ALBERTA--(Marketwire - June 26, 2009) - Petro Andina Resources Inc. (Petro Andina or the Company) (TSX:PAR) announces that it has received US $6.9 million of Argentine Petroleum Plus fiscal credits and has applied $5.5 million of the fiscal credits against export taxes payable.

The Argentine Secretariat of Energy has awarded Petro Andina with US $6.9 million of fiscal credits due to the Company's fourth quarter 2008 production growth. The Company has applied US $5.5 million of fiscal credits against all export taxes payable on the April 2009 and May 2009 oil export shipments. Petro Andina is currently in the process of applying for a second oil export permit. We anticipate that remaining and any future Petroleum Plus fiscal credits will be used to offset future oil export taxes.

An analysis of the Petroleum Plus program is provided in the Company's year-end 2008 Management's Discussion and Analysis. The program implements a system of fiscal credits calculated on two different performance-based criteria: 1) production growth and 2) replacement of total proved reserves, both over an established baseline calculation of production additions and reserve replacement. The fiscal credits are intended to be applied against export taxes. Applying Petroleum Plus fiscal credits enables Petro Andina to receive world market reference prices and quality differentials for its export shipments.

The Program was effective October 1, 2008 and fiscal credits are awarded quarterly to companies meeting the criteria on a "look back" basis. To date, Petro Andina qualified for both the production growth and reserves replacement components of the Program for 2008 and first quarter 2009 production growth. In addition to the expected 2008 reserve replacement fiscal credit of approximately US $13.9 million, the Company has filed an application for first quarter 2009 production growth fiscal credits of US $6.6 million.

Program Element Period Expected Fiscal Credit Status
Production Growth Q4 2008 US $6.9 million Received - applying
against export taxes
Reserve Replacement 2008 US $13.9 million Application submitted
Production Growth Q1 2009 US $6.6 million Application submitted
Reserve Replacement 2009 To be calculated and submitted annually
Production Growth Post To be calculated and submitted each quarter
Q1 2009

The Company considers the Petroleum Plus credits to be a contingent gain and therefore no fiscal credits have been recorded in any prior period financial statements. Petroleum Plus fiscal credits will be recorded when they are received and applied against export taxes. Petro Andina will record a US $5.5 million gain in the second quarter 2009. When a reliable pattern is established for the processing and receipt of Petroleum Plus claims, the Corporation anticipates that it will begin accruing for the benefits of the Program. Amounts earned from fiscal credits are fully taxable.

Annual requalification for the Petroleum Plus program requires reserves replacement. As noted in our continuous disclosure filings, the Company believes that continually strong waterflood performance should result in an increased recovery factor and therefore increased reserves. In addition, higher realizations resulting from Petroleum Plus fiscal credits enable the acceleration of enhanced oil recovery programs and additional exploration.

Petro Andina has begun the design and construction of an Alkaline Surfactant Polymer (ASP) pilot plant to investigate the potential to use ASP to increase recovery factor by a further 5-15 percent in the main waterflood areas since the reservoir characteristics appear well suited to such an approach. The Company's independent reserves evaluators, GLJ Petroleum Consultants Ltd., estimated that the December 31, 2008 proven plus probable net original oil in place was 183 million barrels, meaning that ASP application could add between 9 to 27 million barrels of reserves. In the La Banda concession, Petro Andina is drilling an additional two exploration wells and one appraisal well during the fourth quarter to follow up on the oil discovery made earlier in 2009.

About Petro Andina

Petro Andina is engaged in oil and natural gas exploration, development and production in South America and the Caribbean region. The Company is continuing to develop its existing reserves and to conduct appraisal and exploration drilling on its 628,000 acre (346,000 net acre) land position in the Neuquen Basin of Argentina. Exploration activities have also begun on its 495,000 acre (247,500 net acre) holdings in the Llanos Basin of Colombia and 211,000 acre (105,500 net acre) holdings onshore Trinidad & Tobago. Petro Andina is headquartered in Calgary, Canada.

Forward-Looking Statements

Certain statements regarding Petro Andina, including management's estimates of the expected future fiscal credits from the Petroleum Plus program, the results of future plans and operations, including waterflood operations, enhanced oil recovery programs and additional exploration activities 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, Colombia and Trinidad & 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, Colombia and Trinidad & 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, Colombia and Trinidad & Tobago. Many of these risk factors are discussed in further detail in the Company's Annual Information Form dated March 31, 2009 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.

With respect to forward-looking statements contained herein, Petro Andina has made assumptions regarding: the continuance and application of the Petroleum Plus program and related laws and regulations in Argentina, the success of its oil and gas activities in Argentina, current and future commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; future operating costs; and other matters.

Although the forward-looking statements contained in this press release are based upon assumptions which management of the Company believes to be reasonable, the Company cannot assure potential investors that actual results will be consistent with these forward-looking statements. Accordingly, Petro Andina gives no assurance nor makes any representations or warranties 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, except as required by law.

Contact Information

  • Petro Andina Resources Inc.
    Michael Kruchten
    Investor Relations
    (403) 517-1733
    (403) 265-8216 (FAX)
    Petro Andina Resources Inc.
    Kenneth G. Pinsky
    Vice President, Finance and Chief Financial Officer
    (403) 517-1729
    (403) 265-8216 (FAX)