Drilling Report

Pan Andean Resources PLC
12 December 2000

EL DORADO TESTING

The final test results from the El Dorado DRD X-1002 well in Bolivia show a
sustainable daily production rate of 10 million cubic feet of gas and 250
barrels of oil condensate.  This flow rate was achieved from 2 intervals
totalling 21 metres in the Devonian Iquiri formation using a 26/64 choke in a
33/8 inch well at a constant pressure of 3,000 psi.

The DRD X-1002 well is 2.8 kms from DRD X-1001 from which 20 million cubic
feet of gas a day flowed from the Iquiri and Los Monos formations.  The well's
objective was to drill on what we believed to be the flank of a large gas
structure.  The nearly identical stratigraphy and similar test results between
the two wells confirm that El Dorado is one large structure.  The parameters
of the gas reservoir are now being assessed but indications suggest a
potential contained gas reserve of at least 500 billion cubic feet of gas. 
The size, location and flow rates, together with further potential to increase
reserves, make El Dorado an excellent development project.

PRODUCTION PLANS FOR EL DORADO

El Dorado is ideally situated close to the booming city of Santa Cruz on the
billion cubic feet daily gas pipeline to Brazil, which runs across the El
Dorado block.  A gas gathering station is some 25kms away from the wells.  

Our consortium partners in El Dorado have a gas market allocation in Brazil. 
Pan Andean is optimistic that it can obtain an allocation in the gas pipeline
and/or develop a local gas market.  Pan Andean already has a joint venture
with Enel Power, part of the Italian utility, to develop a gas-fired power
station to serve the electricity hungry Santa Cruz market.

Plans are underway to lay a pipeline to the gas gathering station and to
produce from the two existing wells at a rate of about 30 million cubic feet
daily.  Pan Andean expects that this will expand to 120 million cubic feet
daily as soon as development wells are drilled.  The reserves and upside
potential could sustain much further expansion.

ADDITIONAL DRILL TARGETS IN BOLIVIA

Pan Andean is examining other targets on the El Dorado block, in which the
company has a 10% interest along with Pan American (owned by BP and Bridas):

*   A neighbouring structure to the El Dorado find which, if it contains
    hydrocarbons, is estimated to hold about 1.5 trillion cubic feet of gas.

*   An oil/gas structure on the border with the Rio Seco block.  Argentine
    independent Pluspetrol is now drilling the Rio Seco structure.  Our
    portion of the structure is modelled, on the basis of 3D seismic, to
    contain 200 billion cubic feet of gas and 5 million barrels of oil.

Pan Andean geologists have also been analysing an oil opportunity at the edge
of the Chapare.  Because of our operating expertise in this region Pan Andean
has been invited to drill the structure in partnership with the current
concessionaire.

POSITIVE IMPACT OF HIGH GAS AND OIL PRICES

The intense focus on exploration drilling tends to obscure Pan Andean's
significant gas and oil production.  In November 2000, Pan Andean produced the
following:

                                     Gas                  Oil
US                 59 million cubic feet           9,700 bbls
Bolivia           100 million cubic feet           8,750 bbls

Current US gas prices are over $8 per thousand cubic feet ('mcf').  Reflecting
the fact that Bolivia and Brazil are still rapidly developing gas markets, gas
prices are currently lower at about $1.50 per mcf.  We expect local and export
gas prices to continue rising in real terms, as has been the experience
elsewhere.  Current revenues are over $1 million monthly.

Pan Andean's US assets acquired by Pan Andean in 2000 were valued on gas and
oil prices significantly below current levels.  The debt incurred to buy the
US assets is being rapidly paid down.  Once the debt is cleared surplus cash
will fund aggressive Bolivian expansion.