The Board of Andes, the Latin American energy group, has received notification that the shareholders of Patagonia Oil & Gas S.A., its consortium partner, have entered into a funding agreement with PetroSaudi International Limited ("PetroSaudi"), which could be worth up to $94.5 million.
The funding agreement between Patagonia and PetroSaudi is worth up to $94.5 million. The cash injection will aid the development of the seven licence blocks in which Andes has a 20 per cent carried interest and a 3 per cent working interest and a 20 per cent royalty interest.
Six of the licence blocks are located in the same basin where Pan American Energy, recently announced a discovery of 100 million barrels of new reserves.
In March 2007, Andes and Patagonia entered into a Consortium Agreement to explore and exploit hydrocarbons in South America. UTEs, consisting of the Consortium and the operator, have been awarded three exploration licences to date covering a total of seven blocks.
The development of these licences will now be aided by the cash injection from PetroSaudi following its funding agreement with Patagonia. Andes has a 20 per cent carried interest in the licences, under which it does not contribute to the exploration costs until the licence block is declared commercial and a 3 per cent working interest. In addition Andes has a 20 per cent royalty interest on all hydrocarbons produced under the Consortium Agreement.
PetroSaudi has agreed to invest US$39.5 million for the first year of the agreement, with an option to invest an additional US$55 million for the second and third year. As of today the UTEs have already received US$7 million to be applied to working programme commitments.
Luis Alvarez Poli, Chief Executive Officer of Andes commented, "The agreement with PetroSaudi, an established worldwide player in the oil and gas arena, ratifies the quality of our assets, whilst the recent discovery by Pan American highlights the significant potential of the basin."
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