17 November 2011

Andes Energia plc

("Andes" or "the Company")

Mata Mora

Drilling Update

Mata Mora well YPF.NQ.MMO.x-1 - Oil and gas presence - High pressure detected

The Board of Andes (AIM: AEN; BCBA: AEN), the Latin American energy group, is pleased to announcethat the exploratory well MMox1 on the Mata Mora concession in the Neuquén province, has been successfully drilled, cased and cemented to a total depth of 3,151 metres. The well confirmed a pay thickness of 136 metres in the Vaca Muerta formation and the presence of oil and gas.

HIGHLIGHTS

·    Oil and gas shows

·    High pressure detected

·    Pay thickness of 136 metres in the Vaca Muerta formation

Mata Mora well YPF-NQ.MMo.x-1

During drilling of exploratory well MMox1, on the Mata Mora block in the Neuquen province, the Vaca Muerta shale formation was found at a depth of 2,990 metres and numerous oil and gas shows were recorded, with the strongest gas show starting at a depth of 3,055 metres below ground level (mbgl), ranging from 440,000 parts per million to a peak of 660,000 parts per million at 3,080 mbgl. Oil shows were also detected in the mud pits.

The well also detected unusually high pressure in the Vaca Muerta formation. As a result it was decided to isolate the open hole section with a temporary cement plug before we continued drilling, reaching a final depth of 3,151 mbgl.

During this second drilling stage flow gas was flared several times with flames reaching 3 to 4 metres in height and producing a black smoke. The chromatography confirmed presence of the entire hydrocarbons chain (C1, C2, C3, C4 and C5). At the same time, a comprehensive suite of open hole logs were run by Schlumberger and Baker, including the recovery of 37 sidewall cores. The analysis of these core samples will provide, along with other data, information on porosity, permeability, total organic carbon, thermal maturity and gas composition, which will be used for completion and stimulation design.

The Vaca Muerta shale interval in the MMOx1 well is approximately 136 metres thick.

The joint venture expects the completion works, full testing and fracturing of MMOx1 to commence within the next 30 days.

Drilling operations were conducted by YPF S.A. ("YPF"), AEN's partner and operator in the Mata Mora block. YPF holds a 63% interest in the Mata Mora  block, Ketsal and Kilwer hold a 13.5% interest, AEN a 13.5% interest and the government entity, Gas y Petróleo del Neuquén, a 10% interest.

Juan Carlos Esteban, Chief Executive Officer of Andes's oil and gas operations commented, "We are pleased and very encouraged with these preliminary results. In the next few months we will determine the size and commercial viability of the resources we have confirmed with this well. The presence of the Vaca Muerta formation in many of the other areas our licences cover, gives us confidence that Andes will become an important participant in conventional and unconventional oil and gas plays in Argentina.".

Qualified Person Review

In accordance with the AIM guidance for mining, oil and gas companies, Mr. Juan Carlos Esteban has reviewed the information contained in this announcement. Mr. Juan Carlos Esteban, an officer of the Group, is a petroleum engineer with over 20 years of experience and is a member of the SPE (Society of Petroleum Engineers).

Enquiries:

Note to Editors:

Andes is a Latin American energy group, with oil and gas, electricity distribution and hydro-electric power interests in Argentina. The Company's focus is on the Argentinean energy sector, which it believes offers premium assets at undervalued prices.

YPF is Argentina's largest oil company and is controlled by Repsol YPF, S.A. ("Repsol"), Spain's largest oil and gas company. Repsol has operations in Europe, Latin America, North America, the Middle East, Asia and North Africa and explores for and produces oil and natural gas, refines petroleum and transports petroleum products and liquefied petroleum gas. At the end of 2009 it had certified reserves of 1,013 million barrels of oil equivalent according to its filings with the NYSE. 

Andes Energia plc ("Andes")

(AIM:AEN)

Unaudited results for

Empresa Distribuidora de Electricidad de Mendoza Sociedad Anonima ("EDEMSA")

for the nine months ended 30 September 2011

EDEMSA, the electricity distributor for the province of Mendoza in which Andes has a 51 per cent. indirect interest, has published its financial results for the nine months ending 30 September 2011. This information, which has been prepared under Argentine GAAP and in Spanish, is available from the web-site of the Argentine Comision Nacional de Valores at www.cnv.gov.ar. This announcement sets out the unaudited financial information of EDEMSA for the same period prepared under IFRS in Argentine Pesos (AR$).

Financial Overview of EDEMSA

In the first nine months of 2011 EDEMSA reported a profit of AR$7 million, compared to a profit of AR$36 million in the first nine months of 2010. However, it should be noted that the 2011 finance costs include non-recurring costs of AR$12 million associated with the refinancing of the debt. Furthermore, the finance costs for the comparable period last year include a one-time gain of AR$21 million resulting from the Total Return Swap agreement ("TRS").

Sales for the first nine months of 2011 increased by AR$30 million over the first nine months of 2010, representing an increase of 6%. This increase is due mainly to the pass through of increases in energy costs and to a lesser extent an increase in energy demand and the rate adjustment in February 2011.

Gross profits in the first nine months were AR$145 million comparable to AR$145 million in the first nine months of 2010. Inflationary pressure resulted in operating profit dropping from AR$66 million to AR$31 million, but this should be considered in the context of the fact that current tariffs are those based on 2008 cost values. The main increases in costs arose in salaries and other employee related costs and the costs of third party services. The company recorded EBITDA of AR$53 million for the first nine months of 2011 compared to AR$87 million for the corresponding period last year.

It should also be noted that, further to the advisory agreement EDEMSA signed with MSO Andes Energia Argentina S.A. a wholly subsidiary of Andes, the income statement of EDEMSA for the nine months includes a charge of AR$6.4 million for these services. 

The highlight of the last quarter was the conclusion of a AR$144 million syndicated loan agreement. This facilitated the buy back and cancellation of the EDEMSA bonds then in issue and the termination of the TRS with Andes and will also allow us to accelerate the implementation of work plans and provide working capital. Finance costs for the period were AR$32 million compared to AR$30 million for the comparable period last year after adjusting the comparable period's costs for the one time surplus resulting from the TRS transaction referred above. As also noted above the finance costs for the period include non-recurring costs of AR$12 million associated with the debt refinancing.

Neil Bleasdale, EDEMSA President commented, "With a background of increasing costs, the delay in the approval of the implementation of the tariff-polynomial formula has impacted adversely our results for the period. However, we are still hopeful that this approval will be forthcoming before the end of the year. On the positive side the repurchase and cancellation of the EDEMSA bonds has changed the company's financial profile and eliminated our foreign currency exposure.".

(Rate of exchange at 30 September 2011 AR$4.21 to US$1.00)

balance sheet

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income statement

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statement of changes in shareholders' equity

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cash flow statement

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