BHP Petroleum, the Australian resources group, has decided to continue to explore the Chapare oil field in Bolivia in which Pan Andean has a 20 per cent carried interest.
The Pan Andean shares, anticipating a good result from the drilling, have soared in the past year. On Friday morning they jumped from 90p sterling (90 per cent of the dealings are in London) to 110p before closing at 95p. They have climbed from 12p a year ago.
Pan Andean, chaired by Dr John Teeling, raised £327,500 in a placing of new shares at 32.75p per share in February. They were placed with clients of British investment institution Rowan Dartington.
Under the terms of the agreement between BHP, Pan Andean and the Bolivian government, at least one well must be drilled in the year beginning July 1st 1996 BHP has now exercised its option to drill and the first well will be commenced in July or August, according to Pan Andean.
BHP has spent 520 million (£12.5 m), mainly on seismic studies, since it farmed into the Pan Andean concession, in 1993. The seismic study, said Pan Andean, revealed "potentially oil bearing structures".
Pan Andean has a 20 per cent free carried interest only for the first well. For the second and subsequent wells, Pan Andean has a 10 per cent free carry, with the right to subscribe at cost for a further 10 per cent. Each subsequent well would cost between $5 million and $6 million, Dr Teeling said. Pan Andean's share would be around $0.5 million.
He noted that the uncertainty surrounding the status of overseas oil companies in Bolivia has now gone following the passing of a new law which allows the privatisation of state oil companies, facilitates the development of the Bolivian Brazilian pipeline and beneficial tax concessions for overseas oil companies.
The first seismic study, which identified numerous structures, confirmed the group's view in the prospectivity of the block, Dr Teeling said. The additional seismic study, completed in 1995, "has further enhanced the potential value". He stressed that the entire Chapare region is shaping up as a promising hydrocarbon provinces, noting that $29 million will be spent on hyrdocarbon drilling and exploration in the Chapare region this year.
