Re Acquisition Agreement, etc

Pan Andean Resources PLC 14 September 2000 Pan Andean has reached agreement to acquire Petrolex SA, a privately owned Bolivian oil and gas explorer and producer. The owners of Petrolex are exiting the oil industry to concentrate on developing their extensive land holdings around the city of Santa Cruz. The purchase price is 3 million Pan Andean shares, options over 1 million Pan Andean shares at 20p and the assumption of up to $5 million in debt, depending on the results of a deep gas well currently being drilled. In addition, Pan Andean will assume drilling expenses of $3.6 million for two wells currently underway. Petrolex has joint ventures in two major Bolivian blocks. The El Dorado block is a highly prospective gas play located on the Bolivia-Brazil pipeline less than 30 kms from the Rio Grande gas gathering station where the gas is pumped to Brazil. Petrolex holds a 10% interest in the block, with the balance being held by BP/Amoco and Bridas of Argentina. A deep well is underway to test a previously discovered massive reservoir. Expectations of success are high. Depending on the outcome of the well, Pan Andean have agreed to assume Petrolex debt on a sliding scale related to the amount of total reserves. If the total block reserves are 200 billion cubic feet of gas Pan Andean will take on $1 million of debt, rising to $5 million for a 600 billion cubic feet reserve. The target depth in El Dorado will be reached by the second week in October. The Monteagudo block in the South of Bolivia is a long-standing oil and gas producer with a current daily output of 12 million cubic feet of gas and 720 barrels of oil. Petrolex owns 30% of the block so their share is 4 million cubic feet of gas and 240 barrels a day worth $300,000 a month in revenue. Existing reserves at Monteagudo are estimated at 84 billion cubic feet of gas and 4 million barrels of oil condensate. The joint venture partners are Petrobras of Brazil (20%), BP/Amoco through Andina (20%) and Repsol, through Maxus (30%). The final hole of a $45 million deep drilling commitment programme is underway. The Petrolex share of the remaining cost is $2.7 million, which will be paid for by Pan Andean. John Teeling, the Chairman of Pan Andean said, 'Petrolex makes us a player in the booming Bolivian gas and oil industry. Not only are we doubling our daily output of oil and gas but we are participating in the most exciting drilling prospect which I have seen in Bolivia. While we are purchasing 100% of the company we are pleased that the owners will remain on board and will assist us in developing our oil interests in Bolivia. The El Dorado deep gas play has the potential to be a major find. We will know in 30 to 45 days. Existing Petrolex reserves, never mind any future discoveries, ensure a good cash flow. This acquisition is a major step forward for Pan Andean and more than compensates for recent drilling setbacks. We now have a good cash flow in Bolivia and are in partnership with some of the worlds best oil companies. More importantly we are drilling again.' The deal, which is expected to close by September 20th, is subject to some additional due diligence and normal approvals. The cash required to fund the drilling commitments will come from that earmarked to drill in Bolivia and from the revenue being earned by Pan Andean in the Gulf of Mexico where high gas prices are having a very beneficial impact on revenues. www.panandeanresources.com email: panand@iol.ie