PetroLatina announced that Colombia's hydrocarbon regulatory agency (the Agencia Nacional de Hidrocarburos ("ANH")) has reversed its previous decision to award block LLA57, in the Llanos basin, to PetroLatina and has decided instead to award the block to a third party. This development does not affect the award to PetroLatina of block VMM28 in the Middle Magdalena basin immediately adjacent to the Company's La Paloma block.
As referred to in PetroLatina's interim results for the six months ended 30 June 2010, the Company's wholly owned subsidiary, Petroleos del Norte S.A. ("PDN"), participated in the ANH's 2010 Colombian licensing round and in late June 2010 was notified that it was the highest bidder for two new blocks, namely VMM28 in the Middle Magdelena basin and LLA57 in the Llanos basin. The awards were made subject to the finalization and signature of formal exploration and production contracts with the ANH.
Since the date of the awards, the Company has been made aware of a conflicting claim over the LLA57 block raised by Parex Resources, an under bidder, which has been under evaluation by the ANH and its appointed external consultant to the bid process, RISCO F.C., alongside other disputed awards. Despite a release on the ANH's website on August 9, 2010 containing RISCO F.C's recommendation that PDN be the recipient of LLA57, the ANH awarded the block to a third party. Although an appeal was made by the Company contesting this award, it was rejected by ANH.
Juan Carlos Rodriguez, CEO of PetroLatina, commented, "It is clearly disappointing to have been unsuccessful in our bid for LLA57. It remains our intention to be represented in all three of the most prolific basins in Colombia namely Middle Magdalena, Putumayo and Llanos, and we will submit bids for new acreage in the Llanos basin in forthcoming bidding rounds.
Despite this, the award of VMM28 in the Middle Magdalena basin represents an exciting opportunity. The block lies to the west of, and immediately adjacent to, our existing La Paloma block containing the Colon field, which we are currently developing. The award of this block represents a continuation of our strategy to build a large and profitable area of core license interests in the Middle Magdalena basin. We now hold 5 contiguous blocks in this area. The block located immediately to the north was awarded to Royal Dutch Shell plc, with whom technical discussions have been held recently to further understand the potential opportunity of the basin."
PetroLatina expects to finalize and sign the formal exploration and production contracts for block VMM28 with the ANH during the fourth quarter of this year.
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