Petro Andina Resources Inc.

Petro Andina Resources Inc.

February 25, 2009 18:00 ET

Petro Andina Announces Reserves Growth

CALGARY, ALBERTA--(Marketwire - Feb. 25, 2009) -


Petro Andina Resources Inc. (TSX:PAR) (Petro Andina or the Company), a company focused on oil exploration and production in South America and the Caribbean, is pleased to provide information on its oil and natural gas reserves as of December 31, 2008, as evaluated by the Company's independent reserves evaluators, GLJ Petroleum Consultants Ltd. (GLJ). The evaluation of Petro Andina's oil and natural gas reserves was conducted pursuant to National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (NI 51-101).

The recovery and reserve estimates of crude oil, natural gas liquids and natural gas reserves provided in this news release are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, natural gas liquids and natural gas reserves may eventually prove to be greater than, or less than, the estimates provided herein. All reserves presented are based on GLJ's forecast pricing effective December 31, 2008, December 31, 2007, and December 31, 2006 respectively.

2008 Year-end Reserve Summary (1)

- Replaced 274 percent of 2008 production on a total proved basis and 308 percent of 2008 production on a proved plus probable basis;

- Increased total proved reserves by 63 percent and proved plus probable reserves by 40 percent from year-end 2007 reserves volumes;

- Increased total proved plus probable reserves value by 96 percent to $557.9 million discounted at 10 percent on a before tax basis (or $13.30 per share (basic));

- Increased total proved plus probable reserves value by 94 percent to $401 million discounted at 10 percent on an after tax basis (or $9.56 per share (basic));

- Increased proved reserves and proved plus probable reserves volume per basic share by 54 percent and 33 percent respectively from 2007; and

- Maintained proved plus probable development locations, as determined by GLJ, relatively unchanged at 271 compared to 281 at year-end 2007 after drilling 245 wells in 2008.

(1)Reserves per share ratio has been calculated using December 31, 2008 unaudited financial information.

2008 Year-end Reserves Volumes

Reserves at Reserves at Reserves at 2008 Reserve
Reserves Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2006 Life Index(4)
Category(2) (mboe)(3) (mboe) (mboe) (years)
Proved 20,199 12,401 4,265 3.6
Proved plus
probable 32,330 23,017 13,342 5.8
Proved plus
probable plus
possible 41,141 30,445 17,030 7.4

(2) Reserves are approximately 100% crude oil, therefore disclosure of oil,
liquids and natural gas volumes has not been provided.
(3) mboe is defined as thousand barrels of oil equivalent.
(4) Reserve Life Index is calculated using unaudited annualized average 2008
Q4 production of 15,299 barrels per day.

2008 Year-end Reserves per Share (5)

Petro Andina increased proved plus probable reserves per basic outstanding share from 0.58 barrels per share at year-end 2007 to 0.77 barrels per share at year-end 2008.

(5) Calculated as barrel of oil reserves per share using December 31, 2008 unaudited basic outstanding shares of 41.96 million.

2008 Year-end Net Present Value

All evaluations and reviews of future net cash flow are stated prior to any provision for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimated future net cash flow shown below is representative of the fair market value of the Company's properties. There is no assurance that such price and cost assumptions will be attained, and variances could be material. The recovery and reserve estimates of crude oil reserves provided herein are estimates only, and there is no guarantee that the estimated reserves will be recovered. Actual crude oil reserves may be greater than or less than the estimates provided herein.

The reserves net present values have been calculated using the GLJ price forecast adjusted for quality and transportation consistent with current Argentine regulations.

Dec. 31, Dec. 31, Dec. 31, Per Share
2008 2007 2006 Dec. 31, 2008
Reserves Category ($000s) ($000s) ($000s) (Basic Outstanding)
Net Present Value Before
Proved 357,024 152,722 66,423 $ 8.51
Proved plus probable 557,879 285,084 192,466 $ 13.30
Proved plus probable
plus possible 697,761 386,282 264,215 $ 16.63

Net Present Value After
Proved 279,759 122,543 53,130 $ 6.67
Proved plus probable 400,987 206,729 134,853 $ 9.56
Proved plus probable
plus possible 490,710 n/a n/a $ 11.69

(6) Net present values discounted at 10 percent.

Reserves Evaluator Escalated Price Forecast (7)

The crude oil price and foreign exchange rates assumptions for the first
five years of the GLJ evaluation are:

WTI Cushing Crude Oil Crude Oil
Exchange Rate Oklahoma Realized Price Realized Price
Year (US$/Cdn$) (US$/bbl) (Cdn$/bbl) (US$/bbl)(8)
2009 0.825 57.50 44.68 36.86
2010 0.850 68.00 47.77 40.60
2011 0.875 74.00 47.34 41.42
2012 0.925 85.00 45.68 42.25
2013 0.950 92.01 45.39 43.12

(7) Does not include Petroleo Plus Program benefits. Post 2013, prices
escalate at varying rates.
(8) Crude oil realized prices are estimated in accordance with current
Argentine legislation which effectively provides a price ceiling, and
the estimates do not anticipate any future changes to the current fiscal

Discussion of Reserve Volume

Reserves additions in 2008 were achieved primarily from a combination of delineation drilling which increased pool size at El Corcobo Norte (ECN) and Cerro Huanul Sur (CoHS); as well as waterflood expansion in both areas and recognition of a larger portion of the Lower Centenario (LC50) zone as economic reserves. All Argentina reserve growth in 2006, 2007 and 2008 was organic; there have been no acquisitions of production or reserves.

Petro Andina's total net original-oil-in-place (OOIP) recognized by GLJ in the proved plus probable category increased 45 percent, from 126 million barrels at year-end 2007 to 183 million barrels at year-end 2008. The recovery factor assigned by GLJ for the waterflood area in the proved and proved plus probable categories remained unchanged from 2007 at 20 percent and 24 percent respectively. The ECN waterflood continues to perform at or above Company expectations and to date there has been limited water breakthrough at producing wells that would allow evaluation of post-breakthrough trends. Post-breakthrough trends when eventually established field-wide will allow for a more thorough examination of the expected recovery factors. Due to the early stage of development, the recovery factor assigned by GLJ for the waterflood area in the proved plus probable plus possible reserves category is 28 percent, only four percent higher than the proved plus probable recovery factor. Approximately 76 percent of the 8.8 million barrels increase associated with the possible category can be attributed to the incremental four percent recovery factor with the balance attributable to an increase in the size of the CoHS field.

The Company will continue its focus on Argentina reserves growth in 2009 by implementing similar strategies to those that have proven successful in previous years. Expansion of the waterflood area continues, with a total of 59 patterns currently on injection. Petro Andina anticipates that during 2009 considerable additional performance information will be gathered to further evaluate recovery factors. The thermal recovery pilot project in the CoHS field has completed the first phase of cyclic injection and is now in phase two pattern flood injection. The Company is also evaluating additional enhanced recovery techniques including the use of alkali surfactant polymers to further increase recovery factors.

Petroleo Plus Program

The reserves net present values have been calculated using the GLJ price forecast adjusted for quality and transportation consistent with Argentine regulations, but without any potential benefits from the recently announced Argentina government Petroleo Plus program. Petroleo Plus implements a system of fiscal credits to be calculated based on two performance criteria: 1) production growth; and 2) replacement of total proved reserves. To qualify for Petroleo Plus, an operator must replace a minimum of 80 percent of its production reserves replacement on a total proved basis annually. A qualifying operator would then receive fiscal credits that could be applied against export taxes, effectively increasing the realized oil price received. The difficulty with incorporating Petroleo Plus-adjusted pricing in the NI 51-101 reserves evaluation is due to the timing of the application of the annual qualifying criteria. Since it is not possible to project definitively that the Company will replace 80 percent of its production on a total proved basis annually, it is not possible to incorporate Petroleo Plus into the reserve evaluator's pricing forecast or, therefore the long-term reserves forecast evaluation. Based on the qualifying criteria announced to date, Petro Andina would have qualified for Petroleo Plus over the last four years and believes it will continue to qualify for 2009 pending certification of the reserves in Argentina. Petro Andina's intention is to include the realized impact of Petroleo Plus as part of its continuous disclosure.

Presentation at RBC Capital Markets' South American Energy Conference

Petro Andina is please to advise that Mr. Wayne Foo, President and CEO will be presenting at the RBC Capital Markets' South American Energy Conference in Toronto, Ontario on Tuesday, March 3, 2009 at 11:15 am MST (1:15 pm EST).

Presentation at the FirstEnergy/Societe Generale Canadian Energy Conference

Mr. Foo will also be speaking at the FirstEnergy/Societe Generale Canadian Energy Conference in New York, New York on Friday, March 13, 2009 at 7:50 am MST (9:50 am EST).

To listen and view this online event, please visit:

The presentation will be available in an archived version at this link for 30 days following the live presentation.

For more information on the webcast please visit or contact the Company directly.

2008 Year-end Financial and Operating Results

Petro Andina is planning to announce its 2008 year-end financial and operating results at close of business on Thursday March 12, 2009. Petro Andina will host a conference call and live webcast to discuss these results on Friday March 13, 2009 beginning at 10:30 am Mountain Standard Time (12:30 pm Eastern Standard Time). Media, analysts or any other interested parties wishing to participate in the call can access it by calling 403-537-9608 or 1-800-952-4972 (toll free in North America). No access codes are required.

The live audio webcast of the conference call will be available through Windows Media Player by following the link posted under the Investor Relations, Events section of the Company's website at Following the conclusion of the call, a link to a replay of the webcast will also be posted on the Company's website.

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. Approximately 100 percent of the Company's current production and reserves are in Argentina where the company continues 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. Petro Andina is headquartered in Calgary, Canada.

About GLJ Petroleum Consultants Ltd.

GLJ is a private firm established in 1972. GLJ has conducted reserve evaluations in Argentina since 1994, and have been the independent engineers for Petro Andina since December 2005. GLJ is independent of Petro Andina.

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, 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 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.

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.
    Kenneth G. Pinsky
    Vice President, Finance and Chief Financial Officer
    (403) 517-1729
    (403) 265-8216 (FAX)