Pan Andean Resources details demerger plan ahead of shareholder vote

Pan Andean Resources (AIM: PRE) provided investors with an update regarding the demerger of its North American and Bolivian operations, and the Petrominerales (TSX: PMG) acquisition of its Colombian and Peruvian assets. Pan Andean sent the relevant proposal documents to investors today, ahead of a shareholder vote at a general meeting which is scheduled for the 22 March 2010.

Petrominerales initially made the £0.15 per share cash-offer for the company’s Colombian and Peruvian assets on 9 December 2009. "I strongly recommend the Petrominerales offer to Pan Andean shareholders.  The £0.15 cash portion of the offer is a fair price for our Colombian and Peruvian assets”, Pan Andean chairman John Teeling commented today. 

Pan Andean will establish a new company named Hydrocarbon Exploration, which will own the North American and Bolivian assets and liabilities. Existing shareholders will receive one share in Hydrocarbon for every Pan Andean share held. The Hydrocarbon shares are deemed to have a value of £0.025p each, based on the Pan Andean directors’ valuation of the North American and Bolivian operations.

“Hydrocarbon Exploration gives shareholders a stake in the existing Pan Andean interests in Bolivia and the United States. These interests have been valued at £0.025 per Pan Andean share, which reflects the political and legal uncertainties surrounding the activities”, Teeling said. “The Hydrocarbon Exploration board of directors will focus on creating value from these assets”.

The total implied £0.175 per share valuation represents a premium of approximately 40% from Pan Andean’s closing share price on 8 December.

The company’s directors have unanimously recommended the proposal. As such they have irrevocably supported the deal in respect of their own beneficial holdings of 14.5m Pan Andean shares, representing approximately 11.4% of the vote.

In December, the company said Hydrocarbon Exploration will initially be an unlisted company, but that it anticipated re-listing the business in due course.

Pan Andean’s full year revenues reported at the end of September amounted to £1.85 million, up from last year’s £1.67 million, while pre-tax profits slid to £0.98 million from £1.2 million, but earnings per share increased to 0.58 pence from 0.39 pence. Most of the company’s profits were generated in the United States, where the company is entitled to royalties of 1.32% and 2.15% from the Gryphon and Phoenix rigs respectively, both of which operate on the High Island 52 block, producing 20 million cubic feet of gas per day (mmcfd) and 6 million mmcfd respectively.

Pan Andean has two joints ventures to develop blocks 114 and 131 in the Ucayali basin and block 141 in the Altiplano around Lake Titicaca and was awarded block 161 in Peru. The Antorcha block in Colombia has estimated oil reserves of 600 million to 1.6 billion barrels with a 10% to 15% recovery.

http://www.proactiveinvestors.co.uk/companies/news/13771/pan-andean-resources-details-demerger-plan-ahead-of-shareholder-vote-13771.html