PAE Unit's Profits Dip 20.1% to US$114mn in Q1

Hydrocarbons producer Pan American Energy's Argentine branch reported a net profit of 359mn pesos (US$114mn) in the first quarter of 2007, down 20.1% from 1Q06.

Sales in the period fell 4.02% to 1.36bn pesos and operating profit slid 20.7% to 628mn pesos, according to company financials.

"As previously informed, revenues from the exploration and production of oil and gas were affected by the amendments to the regulations in force. In the case of oil, from March 2002 an increasing rate of up to 45% of export tariffs on exports has been applied, which has also affected sales prices on the domestic market," PAE said.

In addition, PAE suffered from the government's decision in 2002 to freeze natural gas prices and convert them into pesos.

"In April 2004, the energy ministry and natural gas producers signed an agreement to tend wellhead prices to market. This agreement terminated on December 31, 2006, and at the request of the related authorities, a new agreement allowing the recovery of a market environment will be reached."

Increased sales costs and administrative expenses along with higher financial losses also impacted the bottom line. Rising oil industry costs are a "concern" for management, PAE said.

PAE is the second largest natural gas and oil producer in Argentina and averaged production of 211,900b/d of oil in 1Q07, the company said. PAE's natural gas output in the period totaled 1.20Bm3.

From January-March this year, the company's Argentine oil production rose 3.8% and natural gas output grew 5.1% compared to the year-ago period.


The Argentine branch expects to continue with its investment plans with a view to expanding its business and meeting growing energy demand.

PAE plans to invest at least US$2bn until 2017 and US$1bn from 2018-27 in hydrocarbons E&P in the Cerro Dragón area in the San Jorge basin. Earlier this year, PAE received a US$550mn loan from IFC to develop Cerro Dragón.

The company also plans to spend US$80mn to explore the offshore Centro Golfo San Jorge Marina area. The exploration and eventual operation and development of the area will be carried out through a JV with Petrominera Chubut.

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