Andes Energia Signs Options to Acquire Producing Assets in Argentina

Andes Energia has signed two option agreements to acquire, subject to satisfactory completion of due diligence, further oil and gas assets. The first option is to acquire a 50% interest in a producing oil field in the province of Mendoza ("Vega Grande") and the second option is to acquire a 20% interest in two blocks in the province of Neuquen, the major gas producing basin in Argentina ("Corralera & Mata Mora"). If exercised, these options will significantly bolster the Company's oil and gas assets. Importantly, if the Vega Grande option is exercised, it will be Andes Energia's first producing oil asset and the Corralera block has an existing discovery well.

Vega Grande Highlights:

- Option to acquire a 50% interest in a producing oil field;

- Andes Energia has paid an initial amount of US$1.3m in cash to secure; the option, which will be refunded if the option is not exercised;

- A further payment of US$9.2m will be payable in cash upon exercise of the option with possible further consideration payable in Andes Energia shares depending on the level of reserves discovered;

- If exercised, this will be Andes Energia's first producing oil field and will extend its oil and gas assets into the Mendoza province;

- If exercised, the final owners will be Andes Energia 50%, Petro Saudi Inc. 24% and Grecoil y Cia SRL 26%;

- Exercise of the option may constitute a related party transaction.

Corralera & Mata Mora Highlights:

- Option to acquire a 20% participation in two license blocks;

- US$480,000 payable in cash upon exercise of the option;

- Investment commitment of Andes Energia expected to be approximately US$1.2 million over 3 years;

- Corralera has a discovery well, NQ PB X-3;

- If exercised, the final owners will be Andes Energia 20%, Ketsal S.A 18% and Kilwer S.A. 62%.

Since re-admission to AiM in October, Andes Energia has acquired a controlling interest in Hidroelectrica Ameghino S.A, a hydro power plant. The Company has also recently extended its option to acquire the remaining 50% of SODEMSA, which has a 51% controlling interest in EDEMSA, the main electricity distribution company in the province of Mendoza.

Commenting on the signing of these options, Chief Executive Officer Luis Alvarez Poli said: "We are delighted with the fact that we have been able to identify opportunities to grow our asset base at such a pace, in line with our stated business strategy. Vega Grande will give us existing production in an under-managed and under-exploited field, whilst Corralera & Mata will give us the opportunity to enter the Neuquen province in blocks with tested production."


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