Re Agreement

Pan Andean Resources PLC
06 November 2006


                   FARM-OUT AGREEMENT ON GULF OF MEXICO BLOCK


Pan Andean Resources plc, the AIM listed oil and gas producer (AIM : PRE),  and
their partners Sterling Energy Inc. have signed a Farm-out Agreement on their
High Island 52 Block with an American company Phoenix Exploration Company LP.
(Phoenix) The High Island 52 Block is located in Federal Waters in the Gulf of
Mexico.


Under the terms of the agreement Phoenix have the right to drill a test well
within the next four months. If the well is successful, Pan Andean will retain a
2.15% Royalty Interest on production.


Pan Andean is currently earning in excess of US$ 100,000 per month from the
Gryphon Royalty on the North-East quarter of the High Island 52 Block. This will
not be affected by the Farm-out Agreement with Phoenix. Pan Andean and Sterling,
who share the block 50:50 currently produce about 400,000 cubic feet of gas a
day from one well.


Elsewhere in the Gulf of Mexico, Pan Andean receives US$5,000 a month from a
Royalty Interest on the Eugene Island Block.  Block High Island 30L is expected
to restart production by yearend of 300 barrels of oil per day when current
refurbishment of pipeline and pumping systems are completed.


Pan Andean Resources plc
Jim Finn                                              [phone]

Corporate Synergy Plc
Ian Rice                                              [phone]





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