PGR.L Regulatory News (PGR)

28 February 2012

Andes Energia plc

("Andes" or "the Company")

Drilling Update - Corralera

The Board of Andes (AIM: AEN; BCBA: AEN), the Latin American energy group, is pleased to announce that Andes and YPF S.A. ("YPF") have drilled and cased a second joint vertical exploration well YPF.Nq. Corr.x-1 in the Vaca Muerta shale formation on the Corralera concession, Argentina:

HIGHLIGHTS

·; The well YPF.NQ.Corr.x-1 has been successfully drilled and cased to a depth of 2,405 metres (7,889 feet)

·; The well found a Vaca Muerta thickness of 346 metres (1,135 feet)

·; Petrophysics evaluation and log analysis confirm the highly prospective quality and quantitative properties of the Vaca Muerta shale formation

·; Ryder Scott has attributed 649.8 mmboe of prospective resource to the block which represents an equity net participation of 87.7 mmboe to Andes

Corralera block

The Corralera block covers 83,520 acres (338km2) and is located in the North West region of the Neuquén Basin in West Central Argentina. The Corralera block lies west of Chihuido de la Sierra Negra (the largest producing oil field in the country with cumulative production of 555 mmbbls) and east of Filo Morado (cumulative production of 65 mmboe).

The well was drilled and cased to a total depth of 2,405 metres and found the target Vaca Muerta shale formation, which displays highly prospective properties that exceed the prognosis made prior to drilling.

The top of the Vaca Muerta formation was reached at a depth of 2,058 metres with a total of 346 metres penetrated. The Vaca Muerta shale formation is a thick rich source rock that offers potential for unconventional shale gas and shale oil.

The Company will soon begin integrating the comprehensive data set in order to define a fracture stimulation program and testing options for shale oil and shale gas reservoirs.

The Corralera block has previously tested for hydrocarbons in five different conventional formations.

This well is a continuation of the appraisal program started with the drilling of Mata Mora well YPF MMo.x-1, as announced on 13 September 2011 and 17 November 2011. Drilling operations were conducted by YPF, Andes's partner and operator in the Corralera block. YPF is Argentina's largest oil and gas development company.

YPF holds a 63% interest in the Corralera block; Kilwer S.A. and Ketsal S.A. a 13.5% interest; Andes a 13.5% interest; and the government entity, Gas y Petróleo del Neuquén, a 10% interest.

The Vaca Muerta formation is one of two principal source rocks in the Neuquén basin in Argentina. The formation is late Jurassic, early Cretaceous in age, covers an area of approximately 7.41 million acres (30,000 km²), varies in depth between 5,500 to 14,000 feet and in places is up to 1,400 feet thick. In published reports, the U.S. Energy Information Administration has estimated a risked, recoverable resource of 240 trillion cubic feet ("TCF") of shale gas from the Vaca Muerta formation in the Neuquén basin.

A Ryder Scott Report ("Report"), commissioned by Repsol, reveals 77% of the area, held by Repsol and its associates, to be oil and the balance a mixture of dry and wet gas. The report covered 8,071 km² (1,994,378 acres) and attributed 21,167 mmboe of prospective resources, 1,525 mmboe of contingent resources and 116 mmboe of 3P reserves. YPF has advised Andes that the Ryder Scott Report has attributed 649.8mmboe of prospected resource to the Corralera block of which Andes has a net participation of 87.7mmboe.

The Corralera block is included in this Report, as is the Mata Mora block, in which Andes also has an interest and where a successful Vaca Muerta well was drilled as announced by Andes on 17 November 2011. A recent announcement by Madalena Ventures Inc. reports that a well drilled to test the Vaca Muerta in their Coiron Amargo block flowed 314 barrels of oil per day on initial testing. The Coiron Amargo block is located immediately to the north of Mata Mora in the vicinity of the prolific Loma la Lata area. Americas Petrogras and ExxonMobil announced the presence of hydrocarbons in well LTE.x-1 in the Vaca Muerta formation with shale thickness of 343 metres, similar to Corralera´s Well YPF.Nq. Corr.x-1

Juan Carlos Esteban, CEO of Andes´s oil and gas operations commented, "We are very pleased with the Corralera well in which the log results show a thickness of the Vaca Muertaformation greater than that predicted and with very promising petrophysical properties. The results seen so far, together with the successes in the Vaca Muerta play being reported by companies such as Madalena, Apache, Americas Petrogras, ExxonMobil and YPF, support industry enthusiasm for the continued development of the Vaca Muerta in the Neuquen Basin.".

Andes will host a conference call at 3:00 p.m. GMT (12.00 p.m. BA time) on Wednesday 29 February 2012 to discuss this drilling update. The conference call dial-in details can be obtained by contacting Ben Romney, Buchanan Communications on +44 20 7466 5132.

In accordance with 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.

Madalena Ventures Inc. is an independent, Canadian-based, international upstream oil and gas company whose main business activities include exploration, development and production of crude oil, natural gas liquids and natural gas. The company currently has production and exploration operations in Argentina and is focused on international oil and gas opportunities in South America. Madalena is publicly traded on the TSXV under the symbol "MVN".