Interim Results

Pan Andean Resources PLC
08 December 2004

                            Pan Andean Resources plc

           Interim Results for the six months to 30th September 2004


Highlights

  • Pre-Tax Profit for the six months ending 30th Sept 2004 of £376,000
    (increase of 19% on 2003)
  • Profitable, cash generating and debt-free with £2.2m cash on the balance
    sheet
  • Active drilling program during 2004 with Pan Andean participating in four
    wells
  • Activity in the US will continue with drilling on Estaban licence as well
    as evaluation of existing licences for further drilling opportunities



Chairman's Statement


During the six month period ending 30th September 2004 Pan Andean recorded a
pre-tax profit of £359,000 due mainly to high oil and gas prices. The last few
months have been an exciting and turbulent time for Pan Andean. High gas prices
have been good for our cash flow and the recommencement of production from High
Island 30 L will help our earnings in 2005. The main focus during 2004 has been
on exploration. We, together with our partners, drilled three wells in the US,
two in onshore Texas, one in the Gulf of Mexico and one in Bolivia. The overall
outcome is mixed, two producers in the U.S. and one dry, while the Bolivian
project found gas, but had technical difficulties testing at over 4,000 metres.



The Blackstone Ivory well on Danbury Dome near Houston, Texas had the potential
to make a significant contribution to the company. Targets of 50 billion cubic
feet of gas were identified, but instead we discovered 1 billion cubic feet of
gas. We are now completing the well by drilling the remaining secondary targets
at greater depth. Drilling will be completed during December 2004. We will then
technically evaluate the results and consider drilling the deeper Golden Eye
prospect at 17,000 feet. Sands in the principal two target zones contained
water, not gas. The well, which cost over US $5m and was financed by our
partners, will be brought into production early in 2005 at an expected rate of 3
mmcf of gas per day. Pan Andean farmed out the project and maintained a 20%
carried interest. The net results will be a monthly income of at least US$60k at
no cost to Pan Andean.



Earlier in the year we drilled the Vrazel well in the Danbury Dome area. This
well is now producing 1.3 mmcf a day, worth US$40k a month to Pan Andean, after
four months of significant mechanical and technical problems.



Over the summer, we drilled a well on our High Island 68 offshore Texas licence
in the Gulf of Mexico, participating 50% with the operator. The well contained
no commercial oil or gas. The cost to the company was US $800,000.



Meanwhile, our revenue from gas production continues to grow. We now receive
monthly income from the Gryphon royalty on High Island 52, the Zachry and Vrazel
wells onshore Texas and a small royalty from the North Bob West field in Texas.



Income will grow significantly in early 2005 when High Island 30L comes back on
stream and the Blackstone Ivory well commences production. High Island 30L is an
oil producer in the Gulf of Mexico. It is being upgraded with gas lifts to
increase the output as well as a new piping system.



In Bolivia, with our partner Chaco / BP (Pan Andean has an interest of 10%) we
drilled a fourth well on the large El Dorado gas discovery close to the city of
Santa Cruz. The well was to test the extension of the field and to prove up
reserves. The well was relatively deep at 4,200 metres at an estimated US $7.0m
plus total cost. The well was an exploration success showing that the gas and
condensate reserves extend across the El Dorado fault to the western side of the
anticline. Gas shows were found and production testing undertaken. Mechanical
problems deep in the hole made it impossible to adequately test the extent of
the gas discovery in the main target zone. Electric logs showing the presence of
gas, good porosity and permeability, strengthen our belief that the total
reserves are over 400 bcf of gas and 6 million barrels of associated condensate.



Bolivia is a country blessed with vast gas reserves (circa 60 trillion cubic
feet) and well located to supply the emerging markets of South America, but
major political, fiscal and economic uncertainty has developed. There is no
doubt that the future of Bolivia lies in developing its hydrocarbon and mineral
resources, but it will take time to realise this potential.



We produce oil and gas from our joint venture field at Monteagudo (Pan Andean
interest - 30%). Tightly regulated prices and fluctuating taxes means that we
break even. There are major exploration targets identified by 3D seismic at
depth in Monteagudo. Total, on an adjacent block, has discovered 10 trillion
cubic feet of gas in sands, which run through our block. There is no market at
present for this gas. It is likely that the gas, when developed, will be sold to
Argentina.



The El Dorado gas field is much better situated in eastern Bolivia, close to the
growing city of Santa Cruz and the major gas export pipeline to Brazil. After a
slowdown from 2001 to 2003, Brazilian energy demand is again growing rapidly.
Brazilian gas purchases from Bolivia have doubled in one year. A second pipeline
is planned. We have a clear transport cost advantage due to pipeline proximity
over most competing gas supplies, so we remain hopeful of getting a supply
contract - but it will take time. In the meantime, we are examining the
feasibility of a small Gas to Liquids (GTL) plant to supply diesel to the local
city of Santa Cruz. The technology is proven. The scoping study is completed and
recommends moving to the feasibility stage. The estimated capital cost is US $35
million of which Pan Andean would pay 10%. It would require 20 mmcf gas a day,
which we can supply from the existing wells.



Outlook

In early 2005, Pan Andean will drill the first of three wells on our 25% owned
Estaban property in West Texas. The target structures are medium depth, at 6,400
feet, and not expected to be difficult to complete. Maximum estimated potential
is 6 million barrels of oil, which would enable production of circa 250 barrels
of oil and 300 thousand cubic feet of gas daily.



Exploration potential continues at Danbury Dome. Once we bring the Blackstone
Ivory well on stream we will review the well log and the 3D seismic to decide on
a course of action. There are other targets on the 1,700 acre Danbury Dome base
including the 17,000 feet Golden Eye prospect. This target is independent of
both the producing shallower horizons and also the medium depth horizons, which
proved to be water-wet. Potential is up to 100 bcf of gas and associated
oil-condensate, estimated from good quality 3-D seismic. A better understanding
of the geology is needed before proceeding.



Bringing High Island 30 L back on stream is our top priority in the Gulf of
Mexico. We are re- evaluating well log and seismic data on High Island 52 to
identify potential drilling targets.



While we seek to maximise our cash flow and the potential from our existing
assets, our search for new ventures has been intensified. Projects in Europe and
the Middle East are under evaluation.



Pan Andean remains profitable, cash generative and debt-free with £2.2m cash on
the balance sheet. Profitability going forward will depend on oil and gas prices
and costs will be closely monitored. We are an explorer by orientation and plan
to advance additional drilling prospects during 2005.



Further information

Pan Andean Resources
John Teeling / Jim Finn                                Tel: [phone]


Bell Pottinger Corporate & Financial
Nick Lambert                                           Tel: [phone]


Rowan Dartington
Ian Rice                                               Tel.[phone]




Group Profit and Loss

                                                                                     Six Months ended

                                                                           30 Sep 04                          30 Sep 03
                                                                               £'000                              £'000

Turnover                                                                       1,181                              1,920
Operating Costs                                                                (805)                            (1,586)
                                                                     ---------------                    ---------------
Operating Profit                                                                 376                                334
Interest Receivable                                                               20                                  1
Interest Payable                                                                (37)                               (34)
                                                                     ---------------                    ---------------
Profit before Taxation                                                           359                                301
Taxation                                                                       (108)                               (90)
                                                                     ---------------                    ---------------
Profit after Taxation                                                            251                                211

Profit per share                                                               0.23p                              0.21p


Group Balance Sheet
                                                                          30 Sep 04                           30 Sep 03
                                                                              £'000                               £'000

Fixed Assets                                                                 11,994                              11,190

Current Assets                                                                5,963                               3,345
Current Liabilities                                                         (1,569)                             (1,352)
                                                                    ---------------                     ---------------
Current Assets less Current Liabilities                                       4,394                               1,993
Creditors (amounts falling due after one year)                              (1,561)                             (1,189)
                                                                    ---------------                     ---------------
Total Assets less Liabilities                                                14,827                              11,994

Share Capital and Reserves                                                   14,827                              11,994




Group Cash Flow
                                                                            30 Sep 04                         30 Sep 03
                                                                                £'000                             £'000

Net Cash Inflow from Operating Activities                                       1,280                               470

Returns on Investments and Servicing of Finance                                  (17)                              (33)
Taxation                                                                        (108)                              (90)
Capital Expenditure                                                           (1,215)                             (313)
Financing - Issue of Ordinary Share Capital                                     2,732                                 0
                                                                      ---------------                   ---------------
Increase in Cash                                                                2,672                                34



Notes:

1.   The figures for the six months to 30 September 2004 and 30 September
     2003 are unaudited.  The financial information set out above does not 
     constitute full statutory accounts within the meaning of section 240 of the 
     Companies Act 1985.

2.   Copies of this announcement will be sent to shareholders and will be
     available for inspection at the Company's registered office at 20-22 
     Bedford Row, London  WC1R 4JS.




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