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Pan Ameri Energy LLC (57UC)

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Tuesday 26 June, 2007

Pan Ameri Energy LLC

Miscellaneous

Pan American Energy LLC, Argentine Branch
                  

Pan American Energy LLC, Argentine Branch (PAE) entered into an agreement with
the Province of Santa Cruz by which the term of PAE's exploration and production
concessions in the hydrocarbon producing areas called Piedra Clavada, Koluel
Kaike and the portion of the area called Cerro Dragon located in the Province of
Santa Cruz (the 'Blocks'), in the South of Argentina, is extended while PAE
commits to make certain investments.

This agreement for the extension of the term of the concessions is ruled by Law
N° 26,197, approved on December 6, 2006 and passed on January 3, 2007. 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 500 million American
        dollars until 2017, an additional 300 million American dollars for the
        period 2018-2027, in hydrocarbon exploration and production-related
        activities in the Blocks.

    --  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
        Fomicruz, the energy company of the Province of Santa Cruz. 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 Chubut in which PAE shall operate in an association
        with Petrominera Chubut.

    --  PAE shall contribute to the Province of Santa Cruz 40 million American
        dollars that shall be equally allotted in halves to create a Provincial
        Insfrastructure Fund and a Fund for Economic Diversification in the
        portion of the Golfo San Jorge Basin located in the Province of Santa
        Cruz.

    --  As from the effective date of the agreement, PAE shall pay to the
        Province of Santa Cruz, 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 existing 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 the Blocks 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 will be submitted by the
Government of the Province of Santa Cruz to the approval of the provincial
legislature.
                                                                                                                                                                                                                   

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