Interim Results for the Six Months Ended 30th September 2009
As I write this, Pan Andean is subject to an offer which, if successful, will result in the Company delisting from AIM.

Let me remind shareholders of the terms of the offer.


Petrominerales, a Canadian listed oil and gas producer, focused on South America, is offering: � 15p cash for each Pan Andean share, plus � One Hydrocarbon Exploration Co Ltd share for every one Pan Andean share.


Hydrocarbon Exploration is currently owned 100% by Pan Andean and holds the Companys Bolivian and American assets.

It will be spun off to existing shareholders on a one for one basis.


In effect, existing Pan Andean shareholders are being offered 15p a share cash for the Peruvian and Colombian exploration assets; whilst retaining the same percentage in Hydrocarbon Exploration as they currently own in Pan Andean.

Shareholders will continue to have the exposure to the potential upside in the US and Bolivian assets.


In recent years, the directors of Pan Andean have found it difficult to persuade investors of the value in our assets.

Our share price lacked the advances made by a peer group.

With a large shareholder base of over 6,000 shareholders, many of whom invested years ago at higher prices, there was always a seller.

In recent years, we have been one of the few profitable cash generative junior oil companies on the AIM.

We assembled a top class ground portfolio in Peru, which we farmed out on good terms; despite this our share price still lagged.


We had high hopes for our heavy oil block in Antorcha, Colombia, yet we failed to get a satisfactory farm out.

The option of drilling ourselves was mooted strongly by some, but while we could have drilled one hole from our existing resources, a five hole programme would cost in the region of US$10 million.

This would have required a deeply discounted funding, diluting existing holders.

The final straw was a collapse in the US gas prices, which saw a dramatic drop in our income.

As you will see from the accompanying financials, we report a small loss for the past six months - the Companys first loss in a decade.


With great reluctance and considerable discussion among top management, we expect to sell off our prime exploration properties in Peru and Colombia, and return cash to shareholders.

The remaining assets in Bolivia and in the US generate cash flow, but have their own problems; nationalisation in Bolivia and litigation on Block High Island 30 in the Gulf, where there is a dispute over a decision to clean up capped wells.


Turnover in the six months to the 30th September 2009 was �468,000, a drop of over 60% on the equivalent period in 2008.

This was due almost entirely to a fall in US gas prices.

Costs were strictly controlled, particularly administrative charges, which were reduced by �40,000.

The overall result was a loss of �37,000.
We believe that there remains great potential in our US and Bolivian assets.

Once the Petrominerales deal closes in early 2010, we will focus on extracting value from these assets.


Over the 20 year life of Pan Andean, we raised approximately �20 million.

We drilled high risk holes in the Bolivian jungle and deep holes in Texas.

They were unsuccessful.

By selling our Peruvian and Colombian portfolio, we are able to hand back �18 million to investors, while there is significant potential value in the remaining assets.

As David Horgan, the long time Managing Director commented using football parlance, "We got a draw".

In the high risk world of oil exploration, and in the current economic climate, that is a result.


John Teeling Chairman
17th December 2009
Pan Andean Resources plc Financial Information (Unaudited)
Condensed Consolidated Income Statement Six Months Ended Year Ended 30 Sep 09 30 Sep 08 31 March 09 unaudited unaudited audited �000 �000 �000
REVENUE 468 1,145 1,848 Cost of sales (224) (219) (371) GROSS PROFIT 244 926 1,477
Administrative expenses (263) (307) (477)
OPERATING PROFIT (19) 619 1,000 Investment revenue 0 13 18 Finance costs (18) (14) (38)
PROFIT/(LOSS) BEFORE TAXATION (37) 618 980 Taxation 0 (185) (294) PROFIT/(LOSS) AFTER TAXATION (37) 433 686
Earnings per share - basic (0.03p) 0.36p 0.58p Earnings per share - diluted (0.03p) 0.34p 0.53p
Condensed Consolidated Balance Sheet 30 Sep 09 30 Sep 08 31 March 09 unaudited unaudited audited �000 �000 �000 ASSETS:
NON CURRENT ASSETS
Investments 3 3 3 Intangible assets 9,409 6,525 10,027 Property, plant & equipment 16,817 15,019 17,963 26,229 21,547 27,993 CURRENT ASSETS
Receivables and prepayments 1,318 1,528 1,973 Cash and cash equivalents 1,466 3,047 2,231 2,784 4,575 4,204 TOTAL ASSETS 29,013 26,122 32,197
LIABILITIES:
CURRENT LIABILITIES
Trade and other payables (6,048) (5,574) (6,936) NET CURRENT LIABILITIES (3,264) (999) (2,732)
NON CURRENT LIABILITIES
Provisions and deferred liabilities (3,161) (2,170) (3,282) NET ASSETS 19,804 18,378 21,979
EQUITY:
Share capital 21,422 21,422 21,422 Reserves (1,618) (3,044) 557 TOTAL EQUITY 19,804 18,378 21,979
Condensed Consolidated Statement of Changes in Shareholders Equity
Share based
Share Share Payment Translation Retained Total Capital Premium Reserves Reserves Losses Equity �000 �000 �000 �000 �000 �000
As at 1 April 2008 1,192 20,230 26 (1,887) (4,002) 15,559 Currency translation adjustments 2,386 2,386 Profit for the period 433 433 As at 30 September 2008 1,192 20,230 26 499 (3,569) 18,378
Currency translation adjustments 3,349 3,349 Profit for the period 252 252 As at 31 March 2009 1,192 20,230 26 3,848 (3,317) 21,979
Currency translation adjustments (2,138) (2,138) Profit for the period (37) (37) As at 30 September 2009 1,192 20,230 26 1,710 (3,354) 19,804
Condensed Consolidated Cash Flow Six Months Ended Year Ended 30 Sep 09 30 Sep 08 31 March 09 unaudited unaudited audited �000 �000 �000 CASH FLOW FROM OPERATING ACTIVITIES
Profit before tax (37) 618 980 Depreciation 87 132 110 Finance cost 18 14 38 Investment revenue 0 (13) (18) Exchange Movements 668 616 (251) 736 1,367 859
MOVEMENTS IN WORKING CAPITAL
Increase/(Decrease) in trade and other payable (888) 308 49 (Increase)/Decrease in trade and other receivables 655 (158) (603) CASH USED BY OPERATIONS 503 1,517 305
Finance cost (1) (14) (1) Investment revenue 0 13 18 NET CASH GENERATED IN OPERATING ACTIVITIES 502 1,516 322
CASH FLOW FROM INVESTING ACTIVITIES
Payment for intangible assets (531) - (1,895) Payment for property, plant & equipment (437) (497) (659) Re-imbursements of payments 0 0 1,930 NET CASH USED IN INVESTING ACTIVITIES (968) (497) (624)
NET DECREASE IN CASH AND CASH EQUIVALENTS (466) 1,019 (302)
Cash and cash equivalents at beginning of the period 2,231 1,880 1,880 Effect of foreign rate changes on cash held (299) 148 653
CASH AND CASH EQUIVALENT AT END OF THE PERIOD 1,466 3,047 2,231
Notes:
1. INFORMATION The financial information for the six months ended September 30th, 2009 and the comparative amounts for the six months ended September 30th, 2008 are unaudited.

The financial information above does not constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.
The Interim Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

The accounting policies and methods of computation used in the preparation of the Interim Financial Report are consistent with those used in the Group 2009 Annual Report, which is available at www.panandeanresources.com
The interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to the Auditing Practices board guidance on Review of Interim Financial Information.
2.

No dividend is proposed in respect of the period.
3.

Earnings per share Basic earnings or loss per share is computed by dividing the net profit or loss after taxation for the year available to ordinary shareholders by the sum of the weighted average number of ordinary shares in issue and ranking for dividend during the year.


Diluted earnings or loss per share is computed by dividing the net profit or loss after taxation for the year by the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.
The following table sets forth the computation for basic and diluted earnings per share (EPS):
30 Sep 09
30 Sep 08
31 Mar 09
�
�
� Net profit/(loss) for the period (36,994)
432,732
685,881
Weighted average number of ordinary shares
For basic EPS 119,227,733
119,227,733
119,227,733 For diluted EPS 119,227,733
128,244,733
128,244,733
Basic EPS Diluted EPS (0.03p) (0.03p)
0.36p 0.34p
0.58p 0.53p
Basic and diluted loss per share as at 30 September 2009 is the same as the effect of the outstanding share options are anti-dilutive and is therefore excluded. There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.
4.

Intangible Assets
30 Sep 09
30 Sep 08
31 Mar 09 Exploration and evaluation assets: �000
�000
�000 Cost
Opening balance 10,027
5,848
5,848 Exchange adjustments (1,149)
677
2,037 Additions 531
-
4,072 Re-imbursements received under farm-out agreement -
-
(1,930)
Closing balance 9,409
6,525
10,027
The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation, and therefore inherent uncertainty in relation to the carrying value of capitalised exploration and evaluation assets.


There were no facts or circumstances indicating that the carrying amount of intangible assets, other than those relating to Bolivia, may exceed their recoverable amount, and thus no impairment review was deemed necessary by the Directors.


The realisation of these intangible assets is dependent on the successful discovery and development of economic oil and gas reserves and is subject to a number of significant potential risks including:
� Price fluctuations; � Uncertainties over development and operational costs; � Political and legal risks, including arrangements with governments for licences, profit sharing and taxation; and � Funding requirements.
There are a number of fundamental uncertainties relating to exploration and evaluation assets in Bolivia.

As these uncertainties indicate that the carrying value of assets in Bolivia may exceed their recoverable amount, an impairment review has been carried out by the Board.


The recoverable amount is the higher of the assets fair value less costs to sell and value-in-use.

Given the nature of the Groups current activities in Bolivia, the recoverable amount was based on its value-in-use.


The value-in-use is determined at the cash generating unit level, in this case being geographical segments.

A risk-based valuation is used which combines an assessment of the expected chance of commercial success and likely development cost, and discounting the expected cash flows estimated by the directors over the life of the project.


The key assumptions for its calculation are as follows:
- Likely production reserves - Cash Costs - Oil & Gas prices - Years until production can commence
Likely production reserves are based on the best data available to management from seismic analysis carried out to date.

Oil and gas prices are based on managements best estimate using current and future industry trends.

Discount rates are calculated considering managements estimate of the risk attached to the projects.

The years until production can commence is determined by management.

The directors believe that any likely change in any of these assumptions would not cause the recoverable amount to exceed carrying value.


Having reviewed exploration and evaluation assets relating to Bolivia at 30 September 2009, the directors are satisfied that the value-in-use of the intangible assets is not less than carrying value.

The realisation of the exploration and evaluation assets in Bolivia is dependent on the successful discovery and development of economic reserves which is affected by the risks outlined.

Should this prove unsuccessful the value included in the balance sheet would be written off to the income statement.
5.

Property, Plant & Equipment
Plant & Equipment
Oil & Gas Interest
Total
�000
�000
�000 Cost
At 1 April 2008 32
17,946
17,978 Exchange adjustments 1
1,161
1,162 Additions -
497
497 At 30 September 2008 33
19,604
19,637 Exchange adjustments 7
3,266
3,273 Additions 2
160
162 At 31 March 2009 42
23,030
23,072 Exchange adjustments (3)
(1,789)
(1,792) Additions -
437
437 At 30 September 2009 39
21,678
21,717
Depreciation
At 1 April 2008 17
4,253
4,270 Exchange adjustments -
216
216 Additions -
132
132 At 30 September 2008 17
4,601
4,618 Exchange adjustments 6
506
512 Additions -
(21)
(21) At 31 March 2009 23
5,086
5,109 Exchange adjustments (2)
(294)
(296) Additions -
87
87 At 30 September 2009 21
4,879
4,900
Net Book Value
At 30 September 2009 18
16,799
16,817
Included within oil and gas interests is �3,957,876 in relation to Danbury Dome which is in the development stage.

The realization of the carrying amount is dependent on the successful development of economic reserves and the Groups ability to raise sufficient finance to develop the project.


6.

The Interim Report for the six months to September 30th, 2009 was approved by the Directors on 17th December 2009.
7.

Copies of this announcement will be sent to shareholders and will be available for inspection at the Companies Registered Office at 20-22 Bedford Row, London WC1R 4JS.

The Interim Report may also be viewed at Pan Andean Resources plcs website at www.panandeanresources.com .