PGR.L Regulatory News (PGR)

20 January 2015

Andes Energia plc

("Andes" or "the Company" or "the Group")

Acquisition of Interest in Interoil

The Board of Andes (AIM: AEN; BCBA: AEN) is pleased to announce that at the Interoil Exploration and Production ASA ("IOX") Extraordinary General Meeting, which took place today in Oslo, Norway, the shareholders of IOX approved the issue of 330,000,000 shares in IOX to Andes representing 51% of the enlarged share capital of IOX.

As a result of this transaction, the IOX board will be expanded to seven members of which four will be nominated by Andes, including the position of Chairman. The CEO, CFO and General Manager will be appointed by the new Board of IOX.

Andes is also pleased to announce that the Bondholders of IOX have accepted the proposed restructuring of IOX's NOK 310 million (US$42.2 million) corporate bond (the "Bond") and the US$6.2 million debt due to Proseis AG, and replaced it with a new US$32 million bond of IOX (the "New Bond"), denominated in US$ with a coupon of 6% per annum maturing in 2020 with the option to satisfy coupon payments in the first 2 years by issuing additional New Bonds to the equivalent value.

Acquisition highlights

· Provides substantial increase in group cash flow and 2P reserves

· Significant enhancement of Andes's operating capabilities in Colombia

· Diversifies Group's production base to 9 producing fields in two countries

· Addition of robust cash flow generation capable of funding capital expenditure to target additional upside (including all commitments), even at conservative price assumptions, as well as servicing the new debt

· Potential for material synergies across the portfolio given proximity of IOX's operating licences to Andes's current assets in Colombia

· Management believes there is significant resource upside

· Initial controlling 51% stake acquired with funding in place for potential full acquisition via mandatory offer

Background on IOX

IOX operates production and exploration oil and gas licences in Colombia and has 9 years of operating experience in the country. Previously IOX operated in Peru also but these operations were discontinued in November 2014. The Colombian licences currently produce 1,571 boe/d (1,040 bbl/day oil and 531 boe/day gas), and have approximately 5.7 MM boe of net 2P reserves* (3.5 MM bbls of oil and 11.8 BCF of gas).

The acquisition of AEN's interest in IOX would take Andes's net production to approximately 2,500 boepd and 2P reserves to 23 MM boe.

*Source IOX 2013 IOX Annual Report. Reserves audited by Gaffney, Cline & Associates Inc.

Mandatory Offer

As a result of this private placement, Andes has assumed an obligation to launch a mandatory offer within four weeks for the existing shares in IOX at NOK 0.11 per IOX share.

Andes has also offered to IOX bondholders a guarantee, on the same terms as the mandatory offer, that bondholders have the option to buy any shares tendered under the mandatory offer at NOK 0.11 per share. The mandatory offer is exclusively a cash offer and must be outstanding for four weeks according to Norwegian law.

Alejandro Jotayan, CEO of the Company, commented:

"We are pleased to become the majority shareholder of IOX, which will allow Andes to increase and diversify its production and reserve base. Our management and technical capabilities established in the region, combined with IOX's existing operational base and personnel will contribute to accelerating the development of both company's acreage in Colombia. We are acquiring current production, which provides robust cash flow and additional self-funded exploration and development potential."

Pareto Securities AS is acting as financial adviser to Andes in this transaction.

For further information please contact:

Note to Editors - Andes:

Andes is an oil and gas company focussed on onshore South America with a market capitalisation of circa £183m. The Company has operations in Argentina, Colombia, Brazil and Paraguay, representing three of the largest economies and three of the four largest oil producing nations in South America.

The Company has 20MMbbls of conventional 2P reserves in Argentina and certified resources of 600MMBoe, primarily in the Vaca Muerta unconventional formation in Argentina and 7.5 million acres across South America.

The Company has approximately 2 million net acres in unconventional plays including 250,000 net acres in the Vaca Muerta formation, which is the second largest shale oil deposit in the world and the only producing shale oil deposit outside of the USA. Over 250 wells have already been drilled and fracked in the Vaca Muerta formation.

Andes is the only AIM company on the London Stock Exchange with exposure to Vaca Muerta.

The Company currently produces 1,700 bbls per day in Argentina from 7 conventional fields, generating positive cash flow. Andes, with its partner YPF, has 30 wells planned over the next 12 months, which are funded by the field production cash flow.

Note to Editors - IOX:

Interoil Exploration and Production ASA is a Norwegian based exploration and production company - listed on the Oslo Stock Exchange - with focus on Latin-America. The company operates four production and exploration licences in Colombia. Interoil currently employs approximately 95 people and is headquartered in Oslo.

For the year ended 31 December 2013 turnover excluding the Peruvian operations was US$43.6 million and with profit before tax excluding Peruvian operations of US$12.9 million. As at 31 December 2013 IOX had gross assets of US$85 million.