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Pan Ameri Energy LLC (57UC)

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Friday 18 May, 2007

Pan Ameri Energy LLC

Agreement with the Province of Chubut

Pan American Energy LLC, Argentine Branch
                  Pan American Energy LLC, Argentine Branch (PAE) entered into an agreement with
the Province of Chubut by which the term of PAE's exploration and production
concessions in the hydrocarbon producing areas called Cerro Dragón, in the Golfo
San Jorge, in the South of Argentina, is extended while PAE commits to make
certain investments.

This is the first agreement for the extension of the term of the concessions
under Law N° 26,197, approved on December 6, 2006 and passed on January 3, 2007,
known as the Short Law for Hydrocarbons. This law is in fulfilment of the
constitutional order under which ownership of underground natural resources is
transferred from the Federal Government to the relevant Province.

The main commitments undertaken by PAE are:

    --  PAE shall make an investment of no less than 2 billion American dollars
        until 2017, an additional 1 billion American dollars for the period
        2018-2027, in hydrocarbon exploration and production-related activities
        in the Cerro Dragón Area.

    --  PAE shall also allocate 80 million American dollars to exploration
        activities in the offshore area Centro Golfo San Jorge Marina, located
        in the Golfo San Jorge with the same name. The exploration and eventual
        exploitation of the area shall be performed under a consortium with
        Petrominera Chubut, the energy company of the Province of Chubut. Should
        PAE make any discoveries leading to a commercial opportunity for
        development, it agrees, additionally, to invest 500 million American
        dollars until 2017 to develop the area. These investment commitments are
        also for the offshore area of the Golfo San Jorge Marina, which extends
        to the Province of Santa Cruz

    --  PAE shall contribute to the Province of Chubut 120 million American
        dollars that shall be equally allotted in halves to create a Provincial
        Insfrastructure Fund and a Fund for Economic Diversification in the
        Golfo San Jorge Basin.

    --  As from the effective date of the agreement, PAE shall deliver to the
        Province of Chubut, a Special Contribution in the amount of 3% of all
        net revenues from the concessions.

    --  In the case of Business Social Responsibility, PAE shall broaden the
        scope of its already important commitments with education and the
        development of regional small and medium-sized companies with college
        scholarship programs in the country and abroad and by expanding
        significantly its development programs for local companies.

The execution of the agreement creates a new horizon for sustaining an increase
in production and the reserves in a field such as Cerro Dragón, which has
already been exploited for many years. This new horizon will encourage the
pursuit of long term projects, which require strong investments, new technology
and equipment with the human resources working in the long-term.

It is important to point out that the agreement has been submitted by the
Government of the Province of Chubut to the approval of the provincial
legislature.
                                                                                                                  

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