Pan Andean Resources is considering taking legal action against BHP, its former Bolivian partner, over a "premature and unfortunate leak of information", on its first exploration well in the Chapare block, in Bolivia.

It has also accused BHP of drilling in the wrong place and missing the structure at which they had been aiming. Pan Andean's chairman, Dr John Teeling, tells shareholders in his annual review, that shareholder expectations had risen to fever pitch during the drilling so the positive results when announced were seen in a bad light. The negative impact was exacerbated by the leak "from our partner BHP's office in Santa Cruz, Bolivia".

The leak, he adds, has been the cause of ongoing friction with BHP. And "the entire matter is in the hands of our legal advisers". Pan Andean's share price collapsed from 115p to 40p, wiping more than £17.9 million off the value of the company, last October, after one investor put a substantial block of shares on the market, just hours before Pan Andean announced that it had failed to find oil in any commercial quantity at the Chapare oil field.

This prompted an inquiry by the London Stock Exchange. Pan Andean, although registered in Dublin, has a listing on the Alternative Investment Market (AIM) in London. Pan Andean provided relevant information to the exchange and has said it does not expect to have any further involvement in the inquiry.

The shares fell again last May - by 16.5p to 32p - following the revelation that its joint venture in Bolivia was to be broken up.

Dr Teeling tells shareholders that Pan Andean was not satisfied with the BHP review and analyses of the drilling. As a result two studies were commissioned, one by Oilfield Production Consultants of London and the other by Bolivian experts.

They concluded that "BHP had drilled in the wrong place and had missed the structure". Dr Teeling, however, adds the rider that "there is no reason to assume that more accurate drilling would produce a different result".

Nevertheless, "Chapare needs to be drilled" and negotiations are actively taking place to find another partner. Four international oil companies have signed confidentiality agreements and three have reviewed available date, according to Dr Teeling. A deal is expected to be announced in September or October. Dr Teeling told The Irish Times that Pan Andean's carried interest should be larger than under the BHP arrangement.